Coinbase Global (COIN) has submitted an application for a national trust bank license, aligning itself with other cryptocurrency companies that are pursuing a credential that has caused some apprehension within the banking sector.
The firm aims to obtain this innovative banking charter from the Office of the Comptroller of the Currency (OCC) to expand its institutional custody services, as noted by Coinbase’s vice president and head of institutional product, Greg Tusar.
“We’re thrilled about the possibility of acquiring a national trust charter for our custody operations, and we believe it will open up various opportunities for us in the future,” Tusar expressed during an interview.
In contrast to a full-service national bank charter, a national trust bank license does not enable a company to provide loans or accept deposits, and customer accounts typically lack FDIC insurance. Instead, this license allows a firm to protect client assets, facilitate payments and other transactions on behalf of clients, and settle certain transactions.
This special-purpose national bank charter also permits companies to manage and safeguard stablecoin reserves.
Stablecoins are digital currencies tied to the value of a dollar, a different fiat currency, or gold. They maintain their value through reserves, which are commonly composed of cash or US Treasury securities. In July, President Trump signed the inaugural piece of legislation establishing a federal framework for dollar-pegged payment stablecoins, designating the OCC as the main federal authority.
Read more: How stablecoins work
Currently, only one cryptocurrency entity, Anchorage Digital, possesses a national trust bank license. However, this year, over a dozen different businesses have applied for such a license according to the OCC’s records. This includes several prominent cryptocurrency firms dealing with stablecoins, like Circle (CRCL), Ripple (RIPL.PVT), Bitgo, and Paxos.
Banks and their lobbyists are expressing dissatisfaction regarding these applications, citing concerns about the intentions and business models of the applicants, including worries that some may exploit the license to offer a deposit-like banking service utilizing stablecoins without appropriate regulatory scrutiny.
“Allowing deposit-like capabilities through a trust charter creates an uneven playing field and circumvents Congress and the regulatory framework,” asserted Mickey Marshall, regulatory counsel for Independent Community Bankers of America, in a recent opinion piece published earlier this week.
According to Tusar, Coinbase does not intend to transition into a comprehensive banking institution. Instead, he characterized the trust bank application as a vital credential for its custody business, which is central to the prime brokerage segment that Coinbase is developing.
