Fintech and cryptocurrency companies are pursuing state or federal banking charters, seeking to grow their operations under the more crypto-accommodating Trump administration, with industry leaders reporting an increase in charter applications and discussions.
“We’ve noticed a significant rise in interest. We are currently engaged in several applications,” stated Alexandra Steinberg Barrage, a partner at the law firm Troutman Pepper Locke. However, companies are remaining “cautiously optimistic” as changes in regulatory leadership take place.
Obtaining a bank charter entails stricter regulatory scrutiny, yet it can lower borrowing costs and boost credibility. Bank charters empower firms to reduce their capital costs by taking deposits, although this issue remains a major point of debate within the cryptocurrency community.
Many cryptocurrency businesses have historically hesitated to pursue bank status due to the associated regulatory requirements, instead opting to embrace the industry’s principles of decentralization and improving access to financial services for the unbanked and underbanked populations.
Notable cryptocurrency firms like Paxos, Anchorage, and Protego have transitioned into federally regulated crypto ‘banks’ after acquiring a federal trust charter via the U.S. Office of the Comptroller of the Currency (OCC). Similarly, Kraken and Avanti have obtained Special Purpose Depository Institution charters in Wyoming, establishing themselves as state-regulated crypto banks.
New bank charters have traditionally been scarce. From 2010 to 2023, the average number of approvals by regulators was only five per year, a steep drop from 144 annually between 2000 and 2007, according to S&P Global.
The decline in applications can be attributed to low interest rates, concerns over profitability, and regulatory obstacles. Officials from the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve have indicated support for simplifying the application process. Nevertheless, launching a new bank remains a costly endeavor, with setup expenses ranging from $20 million to $50 million.
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