US Regulator to Shake Up Banking With Federal Charters for Payment Firms

The U.S. Office of the Comptroller of the Currency (OCC) is forging ahead with a long-in-the-works plan to offer national banking charters to payment firms that don't take deposits, but not everybody is happy.

• According to a Tuesday report by Politico, Acting Comptroller of Currency Brian Brooks is spearheading the move that would empower payment firms to operate across state lines with a single set of consolidated rules.
• The charter would simultaneously enable such firms to expand their financial service offerings and avoid having to apply for licencing in each state individually.
• Brooks told Politico the OCC would be ready by Tuesday to begin processing applications for the charters, which could potentially include companies like Paypal and Coinbase.
• Brooks is a former executive of the U.S. cryptocurrency exchange Coinbase, having served as chief legal officer from September 2018 until his departure to the OCC – a position he has held for three months.
• “I can supervise the payments activities of JPMorgan, but I can’t supervise the payments activity of Square,” Brooks said in Politico's report, referring to Twitter founder Jack Dorsey's payments platform. “That seems really weird to me.”
• A spokesperson from the OCC told CoinDesk all charter applications would be made public with a comment period, but said they were not yet aware of any specific applications from payment firms.
• The role of the OCC is to regulate, supervise, and provide a charter for national banks and federal savings associations operating in the U.S.
• Brooks said the OCC was "satisfied" it doesn't need a new regulation or statute to move ahead with its decision.
• However, the news has sparked outrage among traditional banks, credit unions and elsewhere, per Politico's report.
• "A few months into his service in an acting capacity, a bank regulator (and former cryptocurrency lawyer) pushes ahead with a legally dubious plan to give tech companies banking charters," tweeted Graham Steele, director of the Corporations and Society Initiative at Stanford Graduate School of Business.
• The New York Department of Financial Services (NYDFS) has previously won the backing of a judge in blocking the OCC's plan for the "Fintech Charter" (first proposed in 2016) in the state.
• Linda Lacewell, superintendent of the NYDFS, retweeted Steele's comment and pointed out that OCC's appeal of the ruling is still to take place.
• U.S. states believe the OCC is stepping outside its remit in offering the new charter, according to Margaret Liu, deputy general counsel at the Conference of State Bank Supervisors.
• Such issues haven't put off Brooks, who told Politico he saw the OCC's role more as a regulator of services than entities.

See also: Following OCC Letter, Some US Banks Appear Open to Providing Crypto Services