The Office of the Comptroller of the Currency (OCC) announced on Tuesday they are to begin accepting applications from fintech companies that wish to become national banks.
“The decision to consider applications for special purpose national bank charters from innovative companies helps provide more choices to consumers and businesses, and creates greater opportunity for companies that want to provide banking services in America,” Comptroller of the Currency Joseph M. Otting said.
Such fintech bank charters were suggested in 2017, but devolved into a court battle that sort of put them on the back end, until now. They say:
“The OCC has statutory authority, regulations, and policies that govern its review and decision making with respect to chartering national banks, including special purpose national banks.
That authority includes companies that engage in one of the core banking functions (paying checks, lending money, or taking deposits) and is described at 12 CFR 5.20(e)(1).
That authority does not require the bank to take deposits within the meaning of the Federal Deposit Insurance Act and therefore would not require insurance from the Federal Deposit Insurance Corporation.
Qualifying fintech companies also may apply for federal charters under the OCC’s authority to charter full-service national banks and other special purpose banks, such as trust banks, banker’s banks, and credit card banks.”
In a policy statement, OCC says they wish to support responsible innovation, arguing that the banking system must adapt to technological advancements.
“The OCC’s decision is consistent with bi-partisan government efforts at federal and state levels to promote economic opportunity and support innovation that can improve financial services to consumers, businesses, and communities,” they say.
This decision will now allow fintech companies, such as Coinbase or others, to apply to one regulator and thus be in compliance with all money related regulations.
Currently fintech companies have to deal with a balkanized regulatory system where different agencies have different oversights which sometime overlap, with compliance further required in regards to a variety of state laws that often contradict each other.
Making the process very time consuming and costly to the point where America has just about two regulated crypto exchanges. The fintech charter may change that as OCC has federal oversight, but strict requirements similar to any bank would need to be complied with by fintech or crypto and blockchain start-ups.