The crypto custodian Anchorage has received conditional approval for a national trust charter from the US office of the Comptroller of the Currency (OCC), making it the first national “digital asset bank” in the US
The custody, management and trading of digital assets have been regulatory obstacles for large financial institutions – but these obstacles are gradually being removed. The OCC, part of the finance department that is responsible for the security of banks but also for competitiveness, has now issued three letters of interpretation that form the basis for the custody of crypto by banks, participation in blockchain networks and the provision of Educate payment providers using technology.
“In issuing this charter, the OCC applied the same strict reviews and standards that apply to all charter applications,” said the banking regulator in a Explanation. “By including this applicant in the federal banking system, the bank and industry benefit from the extensive experience and expertise of the OCC in matters of supervision.”
“We are a national bank. The only difference in our line of business is that we use crypto assets compared to other assets, ”said Diogo Mónica, President of Anchorage, in an interview. “The advantage of a state-chartered bank is that all state laws are overridden. The clarity of being regulated by the oldest banking regulator in the US is a very clear message. “
Acting OCC boss Brian Brooks, who spoke at a public event on Wednesday, expressed his belief that banks and financial services in the broader sense will be converted to blockchain-based.
“I think what is needed is to create crypto banks that can hold stable coins that reflect the value of a fiat currency but don’t change the native asset, and you have to have real cryptocurrencies here that they directly with everyone others interact without ever having to get off the ramp, ”said Brooks. “Fiat will ultimately be a thing of the past.”
The Anchorage Trust Company first applied for a national charter with the OCC last November. Along with Kraken and Avanti, these are crypto-native banks, although the latter two are specialty custodians organized under Wyoming State law. The other crypto startups BitPay and Paxos have also applied for federal certificates through the OCC.
The new bank will be launched under the auspices of acting currency auditor Brian Brooks, who has headed the regulator since last summer. This is the cornerstone of several months of efforts to bring the crypto industry closer to the traditional banking world.
“Blockchains are basically banking because they enable value transactions across networks,” Brooks said at the event on Wednesday. “You are [just] in an orthogonally different way. “
During his tenure, Brooks, the former General Counsel of Coinbase, expressed his view that crypto startups can be better regulated at the federal level than at the state level.
“We have had a dual banking system in this country for 150 years. There are many, many banks that have been chartered by the states because it’s the right business model for what they’re focused on, ”Brooks told CoinDesk in June. “If you are focusing on local and regional business, it makes sense to have a state charter. If your focus is on a national business, it probably makes more sense to have a national charter. “
Georgia Quinn, General Counsel of Anchorage, told CoinDesk that applying for a national charter was made easier by the fact that the startup was already operating as a registered trust company in South Dakota.
“We were already a nationally recognized bank and already had an operating history and many relevant procedures and guidelines. So it wasn’t a de novo application, it was just converting a state trust into a national trust, “she said.” I really can’t get enough of the advantage we had of being a trust company already emphasize. “
Granting a banking charter to crypto companies has been a stated goal of Brooks since May when the then First Deputy Comptroller told an audience at CoinDesk’s Consensus, Distribute that “It looks like crypto is banking for the 21st century. ”
The advantages are obvious: Instead of companies having to apply for 49 government money transfer licenses piece by piece, a national charter enables companies to operate across the country immediately.
Plus, Anchorage can develop new services, Mónica and co-founder Nathan McCauley told CoinDesk.
“It means there is a crypto-native company that offers crypto services like lending, staking and is now actually allowed to be connected directly to the core of the financial system,” Mónica said. “We can do all kinds of business, packaged assets that financial institutions can do today but are backed by crypto-assets.”
Anchorage stated in a blog post accompanying the announcement that its new nationwide chartered bank “will clearly meet the definition of a qualified administrator”.
Qualified custodians are legal entities in the United States that manage client funds and hold securities in specific, defined ways. Federal regulators like the Securities and Exchange Commission (SEC) can designate companies as qualified custodians while state regulators cannot.
Crypto firms have long struggled to become qualified custodians due to questions being asked about how digital asset service providers can comply with aspects of the Securities Investor Protection Act of 1970 – specifically, how brokers can demonstrate that no other company has access to its has its own private key.
Mónica said all doubts about managing cryptographic keys are now removed and this would pave the way for the largest, most risk averse investors like pension funds to enter the arena.
“Aside from crypto funds, hedge funds and VCs that are paid to take risks and stay up to date, there are large institutions that are paid to not take risks,” Mónica said. “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.
“Today’s announcement is in recognition of the fact that banks can not only operate with crypto, but that crypto companies can act as banks,” Smith said in a statement. “This is the most important step to date in the complete modernization of our financial services system.”
Out the door
The news comes when Brooks is reportedly planning to leave the federal regulator later this week. While Brooks has been nominated by President Donald Trump for a full term to head the agency, the new President Joe Biden is expected to pull the nomination.
Many of the letters Brooks has overseen have already had legislative setbacks. Rep. Maxine Waters (D-Calif.), Chairman of the House Financial Services Committee, asks Biden to ensure his candidates repeal many of the Trump-era rules and regulations. including all current crypto instructions from the OCC.
A federal charter is an issue that would be more difficult for Brooks’ successor to overthrow.
It is unclear who will win Biden as head of the OCC. The president-elect has announced that he will appoint former Federal Reserve Chairman Janet Yellen as Secretary of the Treasury. The Senate Finance Committee will hold a confirmation hearing for her on Jan. 19, the day before Biden is sworn in.
Yellen or Biden could designate an incumbent controller to run the agency until someone is nominated for a full five-year term. Brooks was originally appointed to the OCC by current Treasury Secretary Steven Mnuchin.
Biden has reportedly appointed former chairman of the Commodity Futures Trading Commission, Gary Gensler, to head the SEC, which may suggest that he is looking for someone with a less deregulatory focus.