OCC Banking Charter Will Provide Bitcoin Exchanges with Special Banking Status

Rage Review : The U.S. Office of the Comptroller of the Currency, which is affiliated with the U.S. Treasury Department, announced on its official website a plan to issue special banking licenses to digital currency exchanges and solicited public opinions. For emerging companies, this move can increase consumer confidence in them and increase interaction with the existing financial system. It has been warmly welcomed by many digital currency exchanges.

Translation: Annie_Xu

The Office of the Comptroller of the Currency (OCC), the monetary policy-making and implementation agency under the Treasury Department, plans to issue special-purpose banking charters to companies in the financial technology field.

The OCC has now announced the initiative and invited public comment. If the initiative is passed, this government-chartered institution will deepen the global trend of bank modernization.

Observers say the initiative has a huge impact on digital currencies and blockchain technology. Attorney Carol Van Cleef said the initiative could legitimize authorized exchanges and “help promote the adoption of cryptocurrencies in the mainstream market.”

Carol Van Cleef

Van Cleef believes that this will not only allow licensed banks to provide reliable cryptocurrency trading services, but also simplify the money transmission authorization process that varies from state to state.

“It can provide a money transmission service authorization solution for all 50 states, making it clear to potential cryptocurrency users whether the service provider is a bank or a cryptocurrency exchange.”

It is said that emerging banks that want to participate in the hanging plan must hold US$2 million in liquid funds, and the cost of becoming a bank is as high as US$40 million.

She also attended a meeting at the Georgetown University Law Center, where OCC Secretary General Thomas J Curry spoke about the importance of the banking charter, with the public interest at the heart of it.

"Fintech companies have the potential to expand financial services and give consumers, households and businesses more control over their financial autonomy."

If there was no FDIC

Crucially, the Federal Deposit Insurance Corporation (FDIC) was not involved in the initiative. The OCC “did not believe they needed to create new laws specifically for financial technology projects.”

The criteria for the authorization review are the bank's chances of success, risk management strategy, consumer protection measures, capital and liquidity.

Jesse Powell

Jesse Powell, CEO and founder of cryptocurrency exchange Kraken, said bitcoin exchanges are trapped by conventional laws and welcomed the initiative.

"Federal authorization of a select few banking functions is a godsend for the fintech industry, which until now has been constrained by high-cost, narrowly selective licensing schemes."

While the project has the potential to reshape the different state licensing laws, it cannot completely eliminate the differences between states.

Peter Van Valkenburgh wrote in his blog post:

"The characteristics of the Internet and digital currency networks mean that a federal license is a wise choice for companies in the digital currency field."

Changing times

The initiative is similar to Switzerland’s plan to create a crypto bank for digital currency companies.

The OCC's March white paper laid the foundation for banking innovation.

During the public comment period, many blockchain leaders agreed that existing regulatory requirements should be modernized to make it easier for technology companies to serve their customers while ensuring the interests of investors and consumers.

Last month, the Swiss Financial Market Supervisory Authority (FINMA) said it plans to create an environment conducive to innovation, allowing crypto banks to grow and develop while protecting relevant stakeholders.

The relevant documents have been posted on the OCC website, and the public comment period will end on January 15, 2017.

While Van Cleef is looking forward to the project’s impact on services such as cryptocurrency exchanges, he also warned that the industry will soon face unprecedented compliance requirements.

"To get a license, they must be held to a higher standard than what is currently required."