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Major cryptocurrency firms, including stablecoin issuer Circle and crypto custodian BitGo, are reportedly exploring the possibility of applying for bank charters or various forms of banking licenses in the United States. According to a recent report by The Wall Street Journal, this move comes as the regulatory landscape for stablecoins continues to take shape. Other prominent companies mentioned in the report as potential applicants include the publicly traded crypto exchange Coinbase and stablecoin issuer Paxos, the latter having already received preliminary conditional approval for a US bank charter back in 2021.
This potential wave of applications follows recent statements from US Federal Reserve Chair Jerome Powell, who acknowledged the growing mainstream adoption of digital assets and suggested that establishing a clear legal framework for stablecoins is a “good idea.” Powell’s comments, made at a recent event, highlighted the consumer use case presented by stablecoins, particularly in light of past “failures and frauds” within the broader crypto space.
Shifting Regulatory Landscape Fuels Charter Interest
The increased interest in bank charters coincides with significant developments in US stablecoin regulation. Earlier in April, the House Financial Services Committee passed the Republican-backed Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act. This bill is progressing alongside the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which had already cleared the Senate Banking Committee in March.
The STABLE Act proposes stricter federal oversight of stablecoins, including a two-year moratorium on collateralized stablecoins backed by self-issued digital assets and a mandate for segregated reserve holdings. In contrast, the GENIUS Act advocates for a more flexible regulatory approach, incorporating both state and federal oversight. Notably, the GENIUS Act would classify stablecoin issuers as financial institutions under the Bank Secrecy Act, subjecting them to stringent Anti-Money Laundering (AML) rules, reserve and liquidity standards, and sanctions checks.
Also Read: XRP Set to Lead U.S. ETF Race: Kaiko Research Predicts 80% Chance of Approval by 2025
Potential Benefits and Burdens of Bank Charters
Obtaining a bank charter could enable crypto firms to operate more like traditional financial institutions, with the ability to accept deposits and potentially offer lending services. This could significantly expand their business models and integrate them further into the traditional financial system.
However, this expansion comes with increased regulatory scrutiny and compliance burdens. Firms holding bank charters are subject to stricter reporting requirements and oversight. Anchorage Digital, a crypto firm with a federal bank charter, reportedly incurred substantial costs to meet regulatory demands. Moreover, recent reports indicate that Anchorage Digital Bank is currently under investigation by the US Department of Homeland Security’s El Dorado Task Force, highlighting the intense scrutiny these firms face. Despite the challenges, the potential for broader operational capabilities under a clear regulatory framework appears to be a significant driving force behind the growing interest in bank charters within the cryptocurrency industry.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of CoinBrief.io. Before making any investment decisions, you should always conduct your own research. Coin Brief is not responsible for any financial losses.
