New York fintech Paxos National Trust is the latest non-traditional bank to be conditionally approved for a banking charter by the Office of the Comptroller of the Currency (OCC).
The OCC granted a preliminary conditional approval for a national trust bank charter to Paxos following a “thorough review” of the company, it announced.
In gaining the charter, Paxos is the first custodian of digital assets 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 allow banks to conduct business across state lines more easily. This flexibility allows a young company like Paxos to focus resources on building great products. A national Trust Bank charter provides us with flexibility to operate across the US while continuing to adhere to the highest regulatory standards.”
He added that the approval would “further support our approach to innovation within regulation and drive important long-term benefits for our clients”.
The American Banking Association, however, has opposed the application arguing that the information in its application was “vague” and the descriptions it provided about its cryptocurrency and fiduciary activities “was not sufficient” for a trust charter.
ABA CEO Rob Nichols said in a recent podcast published by financial consultancy Barefoot Innovation Group that “there should be some degree of levelness as it pertains to supervision and consumer protection” for new market entrants offering bank-like services.
He added that, in future, should a bank-like entity want to enter the US marketplace, regulators must “be careful” and think about what it means “for the overall system, and its safety and security”.
In an op-ed published earlier this year, Nichols and National Community Reinvestment Coalition CEO Jesse Van Tol warned of the risks of granting national bank charters to fintech firms.
The banking industry association has been vocal in its opposition to digital challengers, arguing that they have not been subject to the same levels of scrutiny from regulators as traditional banks.