9 months ago
Companies Push for Bank Charters, Sparking Industry Debate
Imagine if companies like Amazon or your favorite video game maker wanted to start their own banks.
Right now, lots of different companies are asking the government for permission to do just that.
Some of these companies, especially those dealing with digital money like cryptocurrencies, want to become special kinds of banks called 'trust banks.'
These trust banks don't usually take regular money deposits or give out loans like your normal bank.
Instead, they hold onto important stuff for customers and charge a fee.
Banks that already exist are worried about this.
They say it's not fair because these new companies want to offer similar services without following all the same strict rules that big banks have to follow.
They worry it could make the whole money system less safe.
But the companies wanting to start these new services say they need these permissions to be clear about what they're doing and to work with other big companies.
They believe it will help make new kinds of money and services available to everyone.
A surge in applications for national trust bank charters by fintech, crypto, and other commercial companies is occurring.
Companies like Ripple, Coinbase, and Wise are seeking these charters to offer services such as fiduciary services and issue stablecoins.
Existing banking lobby groups are opposing these applications, citing concerns about financial system stability and unfair competition due to differing regulatory burdens.
The debate is linked to the potential disruption posed by stablecoins, which could allow retailers to offer their own payment methods and banking services.
Regulators are also revisiting stances on industrial loan charters and overseeing stablecoin issuers, indicating a dynamic regulatory environment for financial services.
- Who
- Fintech companies (Ripple, Coinbase, Wise), retailers (Amazon, Walmart), and other commercial entities.
- What
- Seeking national trust bank charters or exploring other bank-like services, including issuing stablecoins and offering financing.
- Where
- Primarily in the United States, with applications for national charters.
- When
- Recently, with a notable increase in applications this year and ongoing regulatory reviews.
- Why
- To gain regulatory clarity, offer fiduciary services, issue stablecoins, potentially disrupt traditional banking services, and comply with evolving financial regulations.
Companies Seeking Charters
Banking Lobby Groups
Regulation and Competition
Companies Seeking Charters
Companies like Ripple and Coinbase argue that obtaining bank charters, particularly trust charters, is a way to provide fiduciary services, issue stablecoins, and gain regulatory clarity, which can help them partner with traditional Wall Street firms. They see it as a path to market innovation and offering new products.
Banking Lobby Groups
Banking lobby groups such as the Bank Policy Institute and Independent Community Bankers of America argue that approving these applications could threaten financial system stability. They contend that these companies want to compete with banks without adhering to the same stringent regulatory oversight and capital requirements.
Systemic Risk
Companies Seeking Charters
Coinbase's chief policy officer dismisses concerns as efforts by the banking industry to protect their existing business interests, implying that the proposed services would not inherently increase risk.
Banking Lobby Groups
Groups like BPI believe that approving applications from crypto exchanges like Coinbase could significantly increase risks to the U.S. financial system, citing the need for caution following the 2008-09 financial crisis.
Stablecoins and Disruption
Companies Seeking Charters
Companies exploring stablecoins see them as a way for retailers and others to offer their own payment methods or banking services, potentially cutting out traditional banks and credit card companies.
Banking Lobby Groups
While not explicitly stated as a 'view,' the opposition from banking groups implies concern that the rise of stablecoins and the entry of non-bank entities into financial services could lead to a significant disruption of the established banking model.
Key facts
- Applications for Trust Charters (This Year)
- 12
- Period of Applications
- More than any in the preceding eight years
- Regulator for National Banks
- Office of the Comptroller of the Currency (OCC)
- Key Applicants Mentioned
- Ripple, Coinbase, Wise, Sony Bank
- Types of Charters Sought
- National trust charters, industrial loan charters
- Regulation on Stablecoin Issuers
- The Genius Act tasks the OCC with approving and overseeing U.S. stablecoin issuers.
Quotes
Jonathan Gould
Comptroller of the Currency
“My view is that it’s better for it to be done within the banking system, if it’s legally permissible and can be done in a safe and sound manner”
livemint.com
Bank Policy Institute
A banking lobby group, in a letter to the Office of the Comptroller of the Currency
“could significantly increase risks to the U.S. financial system”
livemint.com
Faryar Shirzad
Coinbase’s chief policy officer
“the group was just trying to protect banks’ business interests”
livemint.com


