Fintech and crypto companies pursue bank charters during Trump administration: Reuters

Fintech and cryptocurrency companies are increasingly seeking state or national bank charters, even though the industry has traditionally opposed centralized banking.

Key Points:

• Fintech and crypto companies are increasingly pursuing bank charters, expecting a more accommodating regulatory environment.
• Obtaining a bank charter enables firms to accept deposits and reduce borrowing expenses but also subjects them to stricter regulations.
• While regulatory agencies have traditionally been slow to approve new bank charters, recent developments indicate a potential shift toward a more efficient approval process.

Financial technology and cryptocurrency firms are seeking state or national bank charters to grow their operations under the more crypto-friendly Trump administration. Industry executives have noted a significant rise in discussions and applications for these charters, according to Reuters.

"We have seen a lot more interest. We are working on several applications now," said Alexandra Steinberg Barrage, a partner at law firm Troutman Pepper Locke. However, she noted that firms remain "cautiously optimistic" as leadership transitions within regulatory agencies take place.

Obtaining a bank charter provides fintech and crypto firms with greater legitimacy and access to lower-cost capital but also comes with stricter regulatory oversight. While charters enable firms to accept deposits and reduce borrowing expenses, the issue of deposit access remains a contentious topic within the crypto industry.

Many cryptocurrency firms have historically resisted becoming banks due to concerns over regulatory oversight, opting instead to focus on decentralization and expanding financial access for unbanked and underbanked individuals.

However, some firms, such as Paxos, Anchorage, and Protego, have obtained federal trust charters through the U.S. Office of the Comptroller of the Currency (OCC), making them federally regulated crypto banks. Meanwhile, Kraken and Avanti secured Special Purpose Depository Institution (SPDI) charters in Wyoming, operating under state regulation.

New bank charters have been historically rare, with regulators approving an average of only five per year between 2010 and 2023, compared to 144 annually from 2000 to 2007, according to S&P Global. Interest in new charters declined due to low interest rates, profitability concerns, and regulatory barriers. While the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve have expressed support for streamlining the process, establishing a new bank remains costly, with expenses ranging from $20 million to $50 million.