Dive Brief:

• Coinbase is pursuing a trust charter with the Office of the Comptroller of the Currency, the cryptocurrency exchange said Friday.
• Securing the charter would allow Coinbase to launch new products beyond crypto custody, including payments and other services, with the assurance of regulatory clarity, wrote Greg Tusar, Coinbase’s vice president of institutional product, in the blog post. 
• Coinbase “has no intention of becoming a bank,” Tusar wrote. But the company believes “clear rules and the trust of our regulators and customers enable Coinbase to confidently innovate while ensuring proper oversight and security.”

Dive Insight:

New York City-based Coinbase confirmed in April it was considering applying for a federal bank charter. Since then, stablecoin issuer Circle, blockchain firm Ripple and blockchain and crypto fintech Paxos have each applied for a trust charter. 

Currently, Anchorage Digital is the only crypto firm to hold the trust bank charter, approved by the OCC in January 2021. That came just days after the regulator issued an interpretive letter – authored by the current Comptroller Jonathan Gould, who at the time was senior deputy comptroller and chief counsel – that said trust banks could engage in activities other than their fiduciary duties.

A trust bank charter has a more limited scope than a traditional bank charter. A trust company manages assets and administers trusts on behalf of individuals or organizations; it cannot lend or take insured deposits since it is not an insured depository institution. 

Coinbase, the biggest U.S. crypto exchange, has “long sought uniform rules and regulations for crypto,” Tusar said. The company has $425 billion in assets on its platform as of June 30.

The OCC charter “will streamline oversight for new offerings and enable continued innovation to integrate digital assets into traditional finance,” Tusar wrote.

Meanwhile, bank trade groups have pushed back on the effort by crypto companies, urging the OCC in July to postpone decisions on the applications. 

In August, Mickey Marshall, assistant vice president and regulatory counsel for bank trade group the Independent Community Bankers of America, labeled the trust charter applicants “risky institutions looking to attract insured deposits to their uninsured deposit-like accounts with few protections for consumers — a recipe for financial instability that risks reducing consumer confidence in the banking system as a whole.”

Marshall urged the OCC to rescind its 2021 interpretive letter and embark on a formal rulemaking related to its national trust charter, to clarify its scope and “ensure alignment with congressional intent.” 

While pursuing the national charter, Coinbase Custody Trust Company and Coinbase will continue operating under the oversight of the New York Department of Financial Services, which has offered its BitLicense framework since 2015. Tusar pointed to that as enabling Coinbase and the broader crypto industry “to progress toward obtaining a federal charter today.”