New York-based fintech Paxos National Trust is the latest nontraditional bank to obtain conditional approval for a banking charter from the Office of the Comptroller of the Currency (OCC).
The OCC granted preliminary conditional approval for a national trust bank charter in Paxos following a “In-depth examination” of the company, he announced.
By obtaining the charter, Paxos is the first digital asset custodian to be regulated at state and federal levels.
Paxos General Counsel and Chief Compliance Officer Dan Burtstein said: “The National Charter was designed expressly to make it easier for banks to conduct business across state borders. This flexibility allows a young company like Paxos to focus its resources on creating great products. A National Trust Bank Charter gives us the flexibility to operate across the United States while continuing to adhere to the highest regulatory standards.
He added that the approval would be “Further support our approach to innovation in regulation and generate significant long-term benefits for our customers”.
The American Banking Association, however, opposed the request, arguing that the information in its request was “wave” and the descriptions he provided about his cryptocurrency and fiduciary business “Was not enough” for a charter of trust.
ABA CEO Rob Nichols said in a recent podcast published by financial advisory firm Barefoot Innovation Group that “There should be a certain degree of uniformity with regard to surveillance and consumer protection” for new market entrants offering banking-type services.
He added that in the future, if a bank-like entity wishes to enter the US market, regulators must “be careful” and think about what it means “For the whole system, its safety and security”.
In an editorial published earlier this year, Nichols and National Community Reinvestment Coalition CEO Jesse Van Tol warned of the risks of granting national banking charters to fintech companies.
The banking industry association has voiced its opposition to digital challengers, arguing that they are not subject to the same levels of scrutiny from regulators as traditional banks.