On Thursday (July 10), the United States confirmed Jonathan Gould as Comptroller of the Currency, becoming the first permanent head of the banking regulator in roughly five years.
His experience as chief legal officer at blockchain firm Bifury and a previous tenure at the Office of the Comptroller of the Currency (OCC) during the previous Trump administration as senior deputy comptroller and chief counsel signal a relaxation of digital asset regulations, particularly for banks, and an easier path for some of nonbanks and digital upstarts to obtain banking charters.
At least of the groundwork has been laid. Back in May, then-acting-Comptroller Rodney Hood debuted Interpretive Letter 1184, which stated that banks “banks may provide crypto-asset custody services in a fiduciary or non-fiduciary duty … Providing crypto-asset custody services is a modern form of traditional bank custody activities.”
Parsing the Testimony
Gould’s own statements at confirmation hearings and in past testimony to Congress shed some light on the regulatory path forward.
In March, appearing before the Senate Banking Committee as OCC nominee, Gould contended that “in the years since 2008, bank regulators have at times tried to eliminate rather than manage risk, frustrating the ability of banks to fulfill their function,” adding that “this blinkered approach to risk management has implications for the cost and availability of credit, the system’s ability to absorb shocks, and its adoption of new technologies and embrace of innovation.”
Separately, In March 2023 testimony before the House Financial Services Subcommittee on digital assets, and while a partner at Jones Day, Gould remarked that “Anecdotal evidence suggests that agency actions over the last 18 months, while responsive to developments in the digital asset ecosystem, are indeed having a chilling effect on banks’ practical ability to engage in digital asset activities as well as their willingness to entertain or maintain digital asset entities as banking customers.” He cautioned that “the agencies’ actions might be overbroad and risk chilling innovative activities. Precluding banks from exploring new technologies, like distributed ledgers, to achieve traditional banking activities, like payments or deposit-taking, risks diminishing the important role played by banks in our economy.”
As for the move into banking for FinTechs, in March, the OCC gave conditional approval to FinTech lender SmartBiz Loans to become a bank holding company through an indirect acquisition of CenTrust, expanding the national bank’s lending and deposit-taking activities. In an interview with PYMNTS, SmartBiz CEO Evan Singer said, “We felt that by having our own bank, and in our position where we’ve got not only the technology but the banking charter as well, [we] could serve small businesses even better than we had,” by extending more loans directly.
And in another example, as reported at the end of last month, Circle Internet Group applied for a national trust charter, aiming to establish a national trust bank called First National Digital Currency Bank, N.A. If the application is approved by the OCC, the bank would oversee the management of the reserve of the USDC stablecoin on behalf of Circle’s U.S. issuer. Ripple and Wise also have applied for charters.
Notes of Caution
On Thursday, the same day as the Senate vote that ushered Gould into his present role, the Independent Community Bankers of America (ICBA) said in a statement and letter to the OCC emailed to PYMNTS that “applications from nonbank digital asset-related entities seeking to establish full-service national banks or limited-purpose national banks pose unique challenges to bank chartering policy and to the safety and soundness of the financial system,” citing risks tied to illicit activities and resolution issues.
In recommending principles to guide regulation, the ICBA said that “companies engaged in commercial activities should not be allowed to own full-service or limited purpose banks in violation of the longstanding U.S. policy of maintaining the separation of banking and commerce.”
