Office Of The Comptroller Of The Currency Opens Applications For Fintech Banks
Interest in financial technology in the United States is at an all-time high. The massive price increase seen by Bitcoin in 2017 created an unprecedented level of exposure for Bitcoin, as well as its hundreds of altcoins with prices tied to the BTC value. As a result of this climb, the community has been exposed to millions of Americans that view cryptocurrencies as a possible route to lasting wealth.
But the cryptocurrencies themselves actually aren’t the most significant part of the cryptocurrency community, especially when it comes to the budding fintech industry within the United States. Financial technology has been revolutionized by the blockchain, a decentralized distributed ledger which tracks, stores, and transfers transaction information across a shared and open source network. The tech has been adopted by hundreds of Fortune 500 companies and it being considered by foreign governmental and institutional agencies all over the world.
The OCC (Office of the Comptroller of the Currency) recently announced their intention to accept applications for financial technology companies to attempt to eventually become national banks within the U.S. With the official press release, the organization outlined that it made its decision in an effort to provide “more choices” to consumers who are increasingly interested in the type of financial transactions offered by increasingly sophisticated financial technology companies utilizing blockchain technologies.
An Old Court Battle
The fintech companies who have expressed interest in this new program have actually tried to push into the industry several times in the past. In 2017, some fintech companies looking to become banks suggested the idea, but the issue became a court conflict which eventually resulted in the fintech companies losing their battle to join the industry.
But the comptroller argues that they are given the authority to charter national banks in whatever way they see fit. Consequently, the organization is more than excited to be able to offer the new opportunity to allow some fintech companies to become potential national banks with new technology backing them.
The OCC concludes that federal law gives them the authority over any company that engages in one core function required of a bank. These functions include check paying/cashing, lending money, or the taking of deposits. For many fintech companies, at least one of these functions is conducted. Banking services using the blockchain, for example, easily satisfy the requirement of taking deposits with no trouble.
And for many more companies in the fintech sector, nearly every requirement to constitute a national bank is met in some way.
For banks qualifying under the new application system, classification as a national bank could have several important ramifications. This would allow them to apply for federal charters, pay taxes and become regulated under the same rules that regular fiat national banks are regulated, and avoid the strict and unique regulatory burden applied in the status quo to companies like Coinbase who primarily operate on the blockchain.
Moving forward, the OCC will continue to evaluate businesses using new financial technologies in order to create a new set of rules to govern the blossoming subsection of potential national banks.