Financial technology and crypto firms are applying for state or national bank charters, aiming to expand their business under the more crypto-friendly Trump administration as industry executives report a notable uptick in charter discussions and applications, Reuters reports.
“We have seen a lot more interest. We are working on several applications now,” Alexandra Steinberg Barrage, a partner at law firm Troutman Pepper Locke, told Reuters. However, firms are being “cautiously optimistic” as regulatory agency leadership changes unfold.
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Becoming a bank brings stricter regulatory oversight, but it can reduce borrowing costs and enhance legitimacy. Bank charters allow firms to lower their cost of capital by accepting deposits, yet accessing these is a major point of contention in the crypto community.
Various cryptocurrency firms have, over time, resisted becoming banks over the regulatory oversight associated with the move, choosing instead to follow the industry’s ethos to further decentralize and improve access to financial services to unbanked or underbanked individuals.
Cryptocurrency firms, including Paxos, Anchorage, and Protego have become federally regulated crypto ‘banks’ after securing a federal trust charter through the U.S. Office of the Comptroller of the Currency (OCC). Kraken and Avanti have secured Special Purpose Depository Institution charts in Wyoming, making them state-regulated crypto banks.
Historically, new bank charters have been rare. Between 2010 and 2023, regulators approved an average of only five annually, compared to 144 per year from 2000 to 2007, according to S&P Global.
Applications dwindled due to low interest rates, profitability concerns, and regulatory hurdles. The Federal Deposit Insurance Corporation (FDIC) and Federal Reserve officials have signaled support for streamlining the process. However, setting up a new bank remains expensive, with costs ranging from $20 million to $50 million, according to the report.
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