coming from Andrew Hayward via Decrypt
National banks and federal savings associations can legally provide crypto custody services for customers in a move hailed by the industry.
The US OCC clarified that national banks can indeed take custody of cryptocurrency.
The office’s letter clarifies previous, long-standing guidance on digital currency.
Industry leaders see it as a significant move for increased crypto adoption in the US.
he United States Office of the Comptroller of the Currency (OCC), an independent bureau within the US Treasury, issued a public letter today clarifying that national banks and federal savings associations have the legal right to take custody of cryptocurrency assets.
Today’s announcement is not a change from a previous policy, but rather a response to a request for clarification from an unknown party. The OCC writes that banks have been able to take custody of digital assets since 1988, and that Bitcoin and other cryptocurrencies are simply a newer version of the same concept.
"This opinion clarifies that banks can continue satisfying their customers' needs for safeguarding their most valuable assets,” Brooks added, “which today for tens of millions of Americans includes cryptocurrency.”
"From safe-deposit boxes to virtual vaults, we must ensure banks can meet the financial services needs of their customers today," said Acting Comptroller of the Currency Brian P. Brooks, in a release. Brooks joined the agency from Coinbase in April, and sold $4.6 million in Coinbase stock before beginning his new government role.
I think I overtly expressed how bullish this news is for the bitcoin & crypto industry on the latest Thriller Coin Talk. But this is just step one for Brian as he also has his eye on instituting a national charter for a broader group of FinTech companies in our space.
Although this particular bid has met strong opposition from New York’s Department of Financial Services (DFS), who argue that the OCC has & is overstepping its authority.
Thats right the almighty BitLicense strikes again.
coming from Brian Korn, Neil Faden, Benjamin Brickner and June Kim of Manatt, Phelps & Phillips, LLP via LendItFinTech
After the Office of the Comptroller of the Currency (OCC) announced in July 2018 it would begin accepting applications for special-purpose national bank charters for fintech companies, litigation and the threat of further litigation by state regulators have scared away applicants. While the OCC does not publicly disclose applicants, we believe there are none. This belief is based on discussions with industry insiders and the covering press, our own feedback from several would-be charter holders, and the fact that after 18 months no charters have been granted.
Despite a companion OCC policy statement and a Department of the Treasury fact sheet that effectively endorsed marketplace lending and special-purpose fintech banks, the process has stalled. Fintech charters promise a national preemptive lending license that removes the risk of the prevailing bank partnership model and the compliance burden of state-by-state licensing. Several factors have contributed to the delay.
First, a lawsuit by the New York State Department of Financial Services (DFS) and other state regulators challenging the authority of the OCC¹ to grant the charter was dismissed for “ripeness,” since nobody had yet applied. As a result, the first applicant would likely ride shotgun on that lawsuit as a co-defendant and incur significant legal costs. States like New York fiercely contest that a bank charter can be granted to a company that does not accept deposits. The implication is that states believe they are more effective regulators than is the OCC since they are closer to the banking public. There are obvious political overtones to this argument and the intensity of the battle.
Second, the OCC announced that fintech-chartered banks would be subject to the same capital and compliance requirements as other banks. This makes the prospect of running the fintech bank quite expensive, especially if deposits are not part of the business model but nonetheless needed to meet capital requirements.²
Third, the ubiquity of the bank partnership model of loan origination has created a path of least resistance that is difficult for other models to compete with. The industry lawyers and investors have gotten comfortable with several “Madden workarounds,” and the threat of adverse litigation, while still present, is tempered somewhat with an industry track record of origination and repayment. What is called “prime” is actually prime and “subprime” is categorized as such and approached by investors accordingly.
With the promise of greater market access tempered by legal uncertainty, we expected to see a rush to be “second” in line for a fintech charter in 2019. Despite the risks, we believe the OCC stands on solid ground and expect its view ultimately will prevail. But we do not believe there is a long queue to apply for a fintech charter, as originators have nearly all pivoted to the bank partnership model.
You see the payments charters would authorize banks to carry out money transmission activities across the US, replacing the patchwork of state payments licenses that companies need to get to operate nationwide.
At this point they would be enabling the greater United States of America to have an open and public payment network running 24/7/365 without any state bureau stopping fintech companies to compete for our deposits.
Ultimately this would lead to creating a more efficient and consistent ecosystem. National banks entering the game also expands that competition and may also allow more traditional institutional investors to deal in crypto.
Step One Banks on level playing field with FinTechs.
Step Two FinTechs on level playing field with Banks.