In a notable shift, crypto enterprises and fintech companies are said to be seeking bank charters under the new administration, potentially establishing a stronger foothold in the financial landscape.
As highlighted in a recent report, these crypto enterprises are pursuing bank charters to broaden their operations and possibly lower their borrowing expenses. At least a handful of industry leaders have indicated that now presents a viable opportunity to enhance credibility with customers through the acquisition of banking licenses.
A bank charter represents a formal authorization granted by a government, enabling a business to function and provide banking services. It delineates the bank’s framework, allowed activities, and the regulatory requirements it must adhere to in order to safeguard customers and ensure financial integrity.
“Interest has surged considerably. We are currently managing multiple applications,” stated Alexandra Steinberg Barage, a partner at Troutman Pepper Locke.
Barage noted that her firm’s clients are “cautiously optimistic” in light of the new administration but are awaiting further details as the incoming administration begins to appoint leadership in financial agencies.
During the previous presidency, gaining bank charters proved challenging, as regulators were hesitant to approve them, particularly for crypto-related firms. The prior administration adopted a more skeptical view of the crypto space compared to the current environment.
Two additional sources involved in potential applications reported that discussions and preparations for bank charters have seen a notable uptick following Donald Trump’s return to office. However, they are closely monitoring how many firms will proceed with their applications.
While obtaining a bank charter imposes stricter regulatory scrutiny, it also offers substantial benefits.
Carleton Goss, a partner at Hunton Andrews Kurth who is handling three applications, explained that a bank charter could enable firms to lower their borrowing costs by tapping into deposits. It would also bolster a company’s legitimacy and open doors to new business avenues and market prospects.
“It’s strategic for them to position themselves ahead of the curve, leading to increased credibility and access to capital at reduced costs via a charter application,” remarked Goss.
In February, reports indicated that major banks on Wall Street were exploring initial public offering prospects with crypto firms. This renewed interest followed signals from significant crypto exchanges such as Gemini and Bullish, which expressed intentions to go public, alongside Kraken and stablecoin issuer Circle, who are also considering public listings.