US Regulator Welcomes Crypto: OCC Opens Doors for Bank Charters!

The Office of the Comptroller of the Currency (OCC) is actively working to revive de novo bank chartering, a strategic initiative that has created a federal pathway for some of the largest companies operating in the cryptocurrency sector. This commitment to invigorating new bank formation remains a top priority for the federal regulator, which has also commended the Federal Deposit Insurance Corporation (FDIC) for its parallel efforts in this domain. Comptroller of the Currency Jonathan V. Gould emphasized that a robust de novo chartering process signifies a healthy banking system and noted that the FDIC's updated review process for deposit insurance applications aligns perfectly with the OCC's overarching goal to reverse the decline in new charters seen in recent years.

Historically, de novo chartering experienced a significant downturn over the past fifteen years. From 2011 to 2014, the OCC received an average of fewer than four charter applications annually, with certain years seeing no applications at all. Gould pointed out that for more than a decade, regulators had effectively signaled discouragement to those aspiring to obtain a federal bank charter and federal deposit insurance. However, this stance has dramatically shifted. Gould now asserts that entities engaged in legally permissible activities, including those involving digital assets and other novel technologies, should have a clear path to becoming a national bank, declaring, "America and the OCC are once again open for business."

This renewed openness has led to a remarkable turnaround in application numbers. Over the last 18 months, the OCC has received 40 de novo applications, a significant increase that includes applications for national trust banks—a charter type the OCC has consistently granted for decades. The agency has demonstrated efficiency, often making rulings within 120 days of receiving a complete application. Illustrating this shift, Erebor Bank, N.A., backed by notable figures like Palmer Luckey, Joe Lonsdale, and Peter Thiel's Founders Fund, recently received final approval and opened its doors, marking the first full-service national bank to do so in five years.

Furthermore, several prominent cryptocurrency companies have already secured conditional approval for national bank charters, including industry giants such as Ripple, Circle, Crypto.com, and Paxos. Donald Trump-backed decentralised finance platform World Liberty Financial has also submitted an application, with aspirations to integrate institutional clients into using its native stablecoin, USD1. For these crypto firms, the appeal of a federal charter is largely structural: it enables them to securely hold client assets and manage trade settlements within a robust, federally regulated framework. For instance, an exchange like Coinbase, whose application is still under review, would be empowered to function as a federal crypto custodian, overseeing assets for larger entities.

However, this progressive stance from the OCC is not without its detractors. The Independent Community Bankers of America (ICBA) voiced strong opposition in December, urging the OCC to reject Coinbase’s application for a national trust bank charter. The ICBA argued that Coinbase possesses "demonstrably flawed risk and control functions" and operates under a governance structure that "prevents independent oversight." Similarly, in February, the American Bankers Association (ABA), the nation's largest banking lobby, pressed the OCC to decelerate its review process for crypto companies' charter applications.

Beneath these procedural objections lies a simmering turf war, with traditional banks expressing significant grievances. One major point of contention revolves around stablecoins: crypto companies' desire to offer rewards to users for holding these tokens is perceived by traditional banks as unfair competition, potentially eroding their vital deposit base. Despite these challenges and criticisms, the OCC has unequivocally stated its intention to continue fostering the formation of new banks and, in so doing, strengthen the overall resilience of the federal banking system.