In a recent op-ed, Comptroller Otting rightly celebrates competition between state and federal regulators and describes the existing dual banking system:
“Since 1863, the United States has benefited from a dual banking system in which companies seeking to conduct the business of banking can choose to operate via state licenses and charters or apply for federal charters and operate nationwide.”
A shortcoming of the dual banking system, as we see it, is that while there are both state and federal options for traditional deposit-taking banks, payments companies who don’t take deposits (cryptocurrency exchanges among them) generally only have one option: state regulation through money transmission licensing. Why, we’ve asked on several occasions, isn’t there a federal regulatory alternative for money transmitters as there is for regular banks?
The OCC’s fintech charter could be that alternative. It would allow a financial services company to become federally regulated as long as it performs any one of the three core banking functions described in the National Bank Act: deposit-taking, lending, or check-cashing (or as the kids these days call it, payments).
Moreover, as we’ve written in our comments submitted to the OCC Fintech Charter proceedings, companies that facilitate payments in cryptocurrency should also be eligible for federal charters just like the Paypals or Venmos of the world.
Today, the Comptroller echoed that sentiment, suggesting that there should be a Federal analog to New York’s recent decision to regulate Gemini and Itbit’s issuance of dollar-backed tokens. We’re thrilled that the federal charter effort is alive and kicking and that the Comptroller is excited for his agency to play a role promoting innovation in the cryptocurrency space.