Rise of Crypto Banks? BitPay and Paxos Announce Application for National Trust Bank Charters with OCC

The U.S. Bitcoin payment service provider BitPay and the U.S. stablecoin issuer Paxos have simultaneously announced their applications to the Office of the Comptroller of the Currency (OCC) to become nationally regulated trust banks under the U.S. federal government's supervision.

BitPay Applies to Become a National Trust Bank

Documents published by The Atlanta Journal-Constitution on December 8th reveal that BitPay, a U.S. bitcoin payment service provider, has applied to the Office of the Comptroller of the Currency (OCC) to organize a nationally chartered trust bank regulated by the U.S. federal government. A national trust bank is a limited-purpose national bank that is allowed to engage in trust activities, bypassing state regulations and coming under direct federal oversight.

The organizers behind this move include BitPay's co-founder and CEO Stephen Pair, co-founder Anthony Gallippi, CFO Jagruti Solanki, Chief Legal Officer and Head of Compliance Eden Doniger, and CMO William Zielke. Eden Doniger, the Chief Compliance Officer, confirmed the news of BitPay's application to the OCC for a "national trust bank" and stated that this would be the first step in establishing a chartered institution for BitPay.

"The OCC is at the forefront of government regulation of the cryptocurrency industry, and our operation as a national trust bank will be subject to strict security and soundness requirements, providing assurance to our customers. We will continue to deliver a high level of service and enable us to comply with a unified regulatory framework."

Paxos Also Submits Application on the Same Day

Simultaneously, U.S. stablecoin issuer Paxos also submitted an application to the OCC for a national trust bank. Regulated by the New York Department of Financial Services (NYDFS), Paxos is a locally compliant digital asset management company in the U.S. The company stated that upon successfully obtaining a national trust bank charter, Paxos will become the first custodian of digital assets regulated at both state and federal levels. Dan Burstein, Paxos's Chief Compliance Officer and General Counsel, stated in a press release yesterday:

"Our mission is to modernize financial market infrastructure and transfer any asset reliably anytime, anywhere. A national trust bank charter will enable us to serve customers nationwide in the most efficient way, helping us achieve our goals."

The Rise of Crypto Banks

Historically, U.S. banks have been unfriendly towards the cryptocurrency industry. Marco Santori, Chief Legal Officer of U.S. cryptocurrency exchange Kraken, previously pointed out on Twitter that one of the biggest obstacles to widespread cryptocurrency adoption is the lack of support from banking services:

"Early participants in cryptocurrency know that one of the biggest obstacles to widespread adoption has been (and remains) the lack of support from banking services. In the early days, Bitcoin was restricted by 'Operation Chokepoint,' and even now, despite widespread acceptance of cryptocurrencies, it still persists."

2/ Crypto OGs know the single greatest impediment to widespread adoption has been and continues to be the lack of access to banking services.

In its early days, Bitcoin was caught up in Operation Chokepoint, and crypto more broadly is still caught up today

— Marco Santori (@msantoriESQ) November 20, 2020

This situation has led to an increasing number of companies in the cryptocurrency field actively applying to become banking institutions. In September of this year, Kraken, a cryptocurrency exchange, through its new entity Kraken Financial, obtained approval for a "Special Purpose Depository Institution (SPDI)" charter, becoming the first compliant banking institution in the U.S. able to provide customers with cryptocurrency deposit, custody, and trust services.