Coinbase contemplates seeking a federal bank charter

Anchorage Digital Pioneers the Way for Federally Regulated Crypto Banking

In a significant regulatory shift, Anchorage Digital, the first and currently the only crypto-native bank with a federal bank charter, is leading the way for other cryptocurrency firms to follow suit. The Office of the Comptroller of the Currency (OCC) has been instrumental in this process, working closely with Anchorage Digital's CEO, Nathan McCauley, to pioneer a path for federally regulated crypto banking.

Obtaining a federal bank charter has numerous benefits for crypto firms. For instance, it simplifies regulatory compliance for state-chartered firms, provides direct access to the payments system, and cuts down on duplicative requirements. Anchorage Digital, which scored its charter in 2021, is proud to pave the way for other crypto firms to reap these benefits.

Last month, the OCC rescinded a Biden-era requirement that banks obtain supervisory non-objection before engaging in crypto-related activities. This move is seen as a significant step that could clear the way for more crypto firms to obtain bank charters. McCauley, who was instrumental in this process, calls the regulatory clarity that comes with an OCC charter "second to none."

Paxos and a third firm, Protego, received conditional OCC charters in 2021, but these expired in 2023. However, the door remains open for these firms, as well as others, to reapply. Four crypto companies, including Coinbase, are planning to seek a bank charter. The others are BitGo, Circle, and Paxos.

The OCC's expanded interpretation of trust bank services has allowed applications for national trust bank charters from crypto firms. This is part of a broader shift initiated under Trump-era regulators, also linked to legislation like the GENIUS Act, which established new federal-level frameworks for payments and stablecoin regulation. These changes create a "third way" for fintechs and stablecoin issuers to gain federal charters or licenses, bypassing state-by-state requirements and allowing stablecoin issuers access to Fed accounts and payment rails.

However, this shift is not without controversy. Traditional banking trade groups have expressed concerns about regulatory loopholes, differing fiduciary standards, and potential gaps in oversight and capital requirements. These concerns could invite increased scrutiny and resistance. Regulators and banking groups are calling for greater transparency and public feedback before fully embracing these new charter models due to concerns over financial stability and regulatory sufficiency.

Despite these challenges, the current and likely-incoming OCC leadership have been pro-crypto. Rodney Hood, the current Acting Comptroller, previously stated that the crypto market is "vitally important" for the financial services market. McCauley believes that more federally chartered digital asset banks would benefit institutions, consumers, and the ecosystem as a whole.

Cryptocurrency firms potentially benefit from applying for a federal bank charter by gaining enhanced legitimacy, the ability to operate nationwide without obtaining state-by-state licenses, and opportunities to offer services more akin to traditional banks, such as custodial and payment services under national oversight. However, drawbacks include opposition from traditional banking trade groups and potential gaps in oversight and capital requirements.

As more crypto firms consider applying for a federal bank charter, the landscape of the cryptocurrency industry is poised to change significantly. The OCC's expanded interpretation of trust bank services and the rescission of the Biden-era requirement are key steps in this process. The future of federally regulated crypto banking remains to be seen, but with the pro-crypto stance of the OCC and the benefits that come with a federal bank charter, it seems that this trend is here to stay.

[1] Coinbase Considering Federal Bank Charter as Part of Push for Crypto Legitimacy

[2] Coinbase, BitGo, Circle, and Paxos to Seek Federal Bank Charters

[3] OCC's Expanded Interpretation of Trust Bank Services

[4] Crypto Firms Eye Federal Bank Charters Amid Regulatory Shift

[5] The GENIUS Act: What It Means for Stablecoins and Crypto Regulation