Crypto Firms Seek Bank Charters Amid Favorable Regulatory Climate

Fintech and cryptocurrency companies are increasingly applying for state and national bank charters, aiming to expand under the more crypto-friendly Trump administration. Legal experts report a surge in applications as firms seek regulatory clarity and financial advantages.

Alexandra Steinberg Barrage, a partner at Troutman Pepper Locke, told Reuters that interest has risen significantly, with multiple applications in progress. However, firms remain cautiously optimistic amid regulatory leadership changes.

Becoming a bank offers benefits such as lower borrowing costs and enhanced credibility, as firms can accept deposits and reduce capital expenses. Yet, the move also brings stricter oversight, a factor that has historically deterred many crypto firms committed to decentralization.

Some companies, like Paxos, Anchorage, and Protego, have secured federal trust charters through the U.S. Office of the Comptroller of the Currency (OCC), while Kraken and Avanti have obtained Special Purpose Depository Institution charters in Wyoming, allowing them to operate as state-regulated crypto banks.

Historically, securing a bank charter has been challenging. Between 2010 and 2023, regulators approved an average of only five new charters annually, a steep drop from the 144 per year seen between 2000 and 2007. Factors such as low interest rates, profitability concerns, and regulatory hurdles discouraged new applications.

However, with the FDIC and Federal Reserve signaling support for streamlining the process, the landscape is shifting. Despite high setup costs ranging from $20 million to $50 million, more crypto firms see banking charters as a strategic move for long-term growth.

As regulations evolve, the debate over whether crypto firms should embrace traditional banking models or maintain decentralized structures continues, shaping the industry's future.