Crypto custodian Anchorage has obtained conditional approval of a national charter of trust from the United States Office of the Comptroller of the Currency (OCC), making it the first âdigital asset bankâ in the United States. United States.
The custody, management and trading of digital assets have been regulatory hurdles for large financial institutions, but these hurdles are gradually being lifted. The OCC, part of the Treasury Department responsible for keeping banks safe but also competitive, has now issued three interpretive letters that set the stage for banks to hold crypto, participate in blockchain networks, and become payment providers using technology.
“In granting this charter, the OCC applied the same rigorous review and the same standards applied to all charter applications,” the banking regulator said in a statement. declaration. âBy bringing this candidate into the federal banking system, the bank and industry will benefit from the OCC’s extensive supervisory experience and expertise.
âWe are a national bank. The only difference is our industry, that we create crypto assets versus other assets, âAnchorage President Diogo MÃ³nica said in an interview. âThe advantage of having a federally chartered bank is that it takes precedence over all state laws. The clarity of being regulated by the oldest regulator for banks in the United Statesâ¦ sends a very clear message. “
OCC Acting Chief Brian Brooks, speaking at a public event earlier Wednesday, expressed his belief that banks and financial services in general will move to blockchain.
“I think what’s needed is the creation of crypto banks capable of holding stablecoins that reflect the value of a fiat currency, but that doesn’t change the native asset, and you have to have real cryptocurrencies.” here where they interact directly with each. other, without ever needing to step off the ramp, âsaid Brooks. “Fiat will ultimately be a legacy of the past.”
The Anchorage Trust Companies Unit first applied for a national charter from the OCC last November, and is joining Kraken and Avanti being crypto-native banks, although the latter two are special-purpose depositories organized under Wyoming state law. Friends crypto startups BitPay and Paxos have also applied for federal charters through the OCC.
The new bank is inaugurated under the auspices of Acting Currency Comptroller Brian Brooks, who has headed the regulator since last summer. It’s the cornerstone of a months-long effort to bring the crypto industry closer to the traditional banking world.
âBlockchains, fundamentally, are banking because they allow the transaction of value across networks,â Brooks said at Wednesday’s event. “They are [just] do it in an orthogonally different way.
During his tenure, Brooks, the former general counsel for Coinbase, voiced his opinion that crypto startups could be better regulated at a federal level rather than at the state level.
âWe have had a dual banking system in this country for 150 years. There are so many banks licensed by the state because it’s the right business model for what they’re focused on, âBrooks told CoinDesk in June. âIf you are focusing on local and regional businesses, it makes sense to have a state charter. If you are focusing on a national business, it probably makes more sense to have a national charter.
Georgia Quinn, general counsel for Anchorage, told CoinDesk that the national charter application process was made easier by the fact that the startup was already operating as a registered trust company in South Dakota.
âWe were already a state chartered bank and therefore already had an operating history and many relevant procedures and policies in place, so this was not a de novo application, it was just the conversion of a state trust into a national trust, “she said.” I cannot stress enough the advantage we had of already operating as a trust company. “
Granting a banking charter to crypto companies is a stated Brooks goal Since maywhen the then first sub-controller told an audience at CoinDesk Consensus: In his opinion, “it looks a lot like crypto banking for the 21st century.”
The advantages are clear: rather than forcing companies to apply piecemeal for 49 state money transfer licenses, a national charter will allow companies to operate nationwide at once.
It also allows Anchorage to develop new services, MÃ³nica and co-founder Nathan McCauley told CoinDesk.
âThis means that there is a crypto-native company that offers crypto services such as lending, staking and is now allowed to connect directly to the heart of the financial system,â MÃ³nica said. “We can go out and do all kinds of activities, wrapped assets that financial institutions can do today, but backed by crypto assets.”
Anchorage said in a blog post accompanying the announcement that its new federally chartered bank “will unequivocally meet the definition of qualified custodian.”
Qualified custodians are legal entities in the United States that hold client funds and hold securities in specific and defined ways. Federal regulators like the Securities and Exchange Commission (SEC) can designate entities as qualified custodians, while state regulators cannot.
Crypto companies have long had problems become qualified custodians, due to questions about how providers of digital asset services can comply with aspects of the Securities Investor Protection Act of 1970 – in particular, how brokers can prove that no other entity does has access to its own private keys.
Monica said that all doubts about the management of crypto keys are now removed, which will pave the way for larger and more risk-averse investors, such as pension funds, to enter the arena.
âBesides crypto funds, hedge funds, and VCs that are paid to take risk and be on the cutting edge of technology, you have large institutions that are paid not to take risks,â said Monica. “This means that all doubts are now resolved and in black and white.”
Kristin Smith, executive director of the Blockchain Association lobby group, welcomed the news.
âToday’s announcement is recognition that not only can banks engage with crypto, but crypto companies can function like banks,â Smith said in a statement. âThis is the most important step to date towards the complete modernization of our financial services system. “
The news comes as Brooks is rumor has it that he is planning his departure from the federal regulator later this week. While Brooks had been named To serve a full term as head of President Donald Trump’s agency, new President Joe Biden is expected to withdraw the appointment.
There is already a backlash from lawmakers against many of the letters Brooks has overseen, with Rep. Maxine Waters (D-Calif.), The chair of the House Financial Services Committee, asking Biden to ensure his candidates repeal many. Trump-era rules and regulations, including all recent OCC crypto advice.
A federal charter is an issue that would be more difficult to overturn for Brooks’ successor.
It’s unclear who Biden will exploit to lead the OCC. The president-elect has announced that he will appoint former Federal Reserve Chairman Janet Yellen as Treasury secretary. The Senate Finance Committee will hold a confirmation hearing for her on January 19, a day before Biden’s swearing-in.
Yellen or Biden could appoint an interim controller to run the agency until someone is appointed to serve a full five-year term. Brooks was originally appointed to the OCC by current Treasury Secretary Steven Mnuchin.
Biden is said to have appointed former Commodity Futures Trading Commission chairman Gary Gensler to head the SEC, perhaps indicating he could look for someone with less emphasis on deregulation.