Hello! Kiah here. Welcome to Fintech Takes Banking, my weekly newsletter where I highlight things I think are interesting or important for bankers and the surrounding environs.
I just spent a couple of very special days in DC! Alex and I traveled to the District for a Fintech Takes coworking day and reception, and I had such a blast. I want to thank Fintech Takes Network member Rachit Khaitan for coming up with such a great idea and asking us to be a part of it, and for Eric Schwartz and the good folks at Canapi Ventures for hosting the reception. |
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The Crypto National Trust Blueprint |
Applying for a bank charter is a lot of things: Expensive, arduous, intense, tedious and a feat of endurance. Rarely is it innovative.
But a slew of digital asset companies have applied for national trust charters from the Office of the Comptroller of the Currency, bringing renewed attention to new types of companies looking to leverage the legacy charter for their innovative business lines and uses. As we discussed previously, the entire financial services industry is rehashing the merits of this debate. But one important difference between 2020-21 and today is that in the past, there were no digital asset companies that had a national trust charter, and today there is.
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Anchorage Digital was one of three crypto companies that applied for a national trust charter or charter conversion with the OCC in that 2020-21 time frame, and is the only one that managed to open. The trust bank started as Anchorage Trust, a non-depository public trust company chartered by South Dakota in 2019. The company is a wholly owned subsidiary of Anchor Labs, a Delaware corporation headquartered in San Francisco. The company offers other services through units like Anchorage Digital Singapore, which is licensed by the Monetary Authority of Singapore; Porto, its institutional self-custody wallet; and Anchorage Digital NY, LLC, which holds a BitLicense from the New York State Department of Financial Services.
The firm decided to pursue a national charter because it is “a clear-cut qualified custodian,” wrote Rachel Anderika, Anchorage Digital Bank’s chief operating officer, in an August email interview. The national trust charter offers “regulatory and legal certainty” because of its federal preemption presumptions, sparing the bank from navigating state-by-state laws.
In January 2021, the OCC conditionally approved Anchorage’s application to convert from a state-chartered trust company to a national trust bank, which is when it changed its name to Anchorage Digital Bank, National Association. The approval came with an operating agreement that outlined the bank’s minimum capital ratios, liquidity plan, a prohibition on significant deviations to the business plan, and expectations for risk management areas such as audit, information technology, and Bank Secrecy Act and anti-money laundering compliance.
“In granting this charter, the OCC applied the same rigorous review and standards applied to all charter applications. By bringing this applicant into the federal banking system, the bank and industry will benefit from the OCC’s extensive supervisory experience and expertise,” the OCC said in the release about the conditional approval. “At the same time, the Anchorage approval demonstrates that the national bank charters provided under the National Bank Act are broad and flexible enough to accommodate evolving approaches to financial services in the 21st century.”
The trust bank charter allows Anchorage Digital Bank to offer federally regulated custody, staking, settlement, on-chain governance and stablecoin issuance for traditional and crypto-native institutions. Rachel said that custodied assets are “bankruptcy-remote with segregated accounts by default;” assets are not held on the trust bank’s balance sheet. The firm is not an insured depository institution and serves only institutional customers, without direct service to retail customers.
She said that the trust charter was a good fit for the company because institutional clients are “less interested in making crypto deposits (or doing some of the other activities that a national bank charter would allow).” “[We] have not considered a conversion” to a depository charter, she said, later adding: “Obtaining (and operating under) a national bank charter is not easy, but it was absolutely the right decision for us.” |
The path of being the nation’s only nationally chartered crypto trust bank has not been smooth for the last couple of years. The regulatory attitude toward crypto shifted shortly after Anchorage received charter approvals (I will not reshash the letters here). The result in the subsequent years was that no other charters were approved — although Protego’s application was extended before expiring — and crypto activities at commercial banks mostly ceased.
In April 2022, the OCC issued a consent order to Anchorage “based on the bank’s failure to adopt and implement a compliance program that adequately covers the required Bank Secrecy Act/anti-money laundering (BSA/AML) program elements.” The OCC terminated that order in August.
Rachel said the lifting of the consent order was “a major milestone” that reflected “tens of thousands of work hours” and “tens of millions of dollars on infrastructure.” Anchorage today employs a 50-person compliance team and leverages in-house technology it developed to bridge crypto and BSA/AML requirements that address OCC feedback.
Since the start of the year, Anchorage has publicly praised the OCC as a regulator, promoting the role it will play under the digital asset regulatory regime that started with the passage of the GENIUS Act. Rachel called the regulatory clarity that comes with OCC supervision “second to none.” She said exams are “rigorous and fair” and that the agency has “built serious muscle and expertise in examining crypto.”
While complying with enforcement actions can be a slog, it is unlikely to be wasted effort, especially as more companies apply for similar charters. Both Rachel and Anchorage Cofounder and CEO Nathan McCauley describe the firm’s position in the market — with its compliance programs that have been scrutinized for years by its federal banking regulator — as a “five-year head start.”
“Anchorage Digital Bank has more experience operating under federal oversight than any crypto company on the planet,” she said. “With a nearly five-year head start, we look forward to continuing to set the standard in federally regulated crypto banking.” |
Crypto Banks Versus Community Banks |
Anchorage knows it is unlikely to maintain its natural monopoly as the only national trust bank focused on digital assets. Rachel said the company welcomes the competition and had “never hoped” to stay the only OCC-chartered digital asset bank.
“Our goal from the very start has been to help forge a federally regulated future for crypto—every charter application is validation of our founding vision,” she said.
Not everyone is so happy to see more competition in the form of more charter applications. These applications have triggered (another) set of letters in opposition, including a July letter signed by the American Bankers Association, Americas Credit Unions, Consumer Bankers Association, Independent Community Bankers of America and National Bankers Association. (Congrats on uniting the credit union trade group with the banks!)
Because I can’t bring myself to read more letters and I can’t inflict that upon my readers a second time, I decided to go directly to one of the authors of some of these opposition letters to explore the arguments. Mickey Marshall is the assistant vice president and regulatory counsel for the ICBA. He said one concern is custodying of stablecoins, which can look and behave like customer deposits sometimes, could be confusing if customers manage them through online accounts that could look like bank account interfaces.
The trade group is also concerned about the new activities that applicants anticipate undertaking after being awarded the charter. Other trust bank applicants may want to marry their charter with a Federal Reserve master account to engage in money movement and payment. This isn’t hypothetical; Wise indicated it would apply for one in its application, and years after getting its trust charter, Anchorage applied for a master account in August.
“[Anchorage has] been having productive discussions with the Federal Reserve regarding master account access. Direct access to Fed payment rails would come with a number of benefits,” Rachel said. “Fed master accounts are really for the facilitation of money movement. Stablecoins enable us to move value across new rails, but there remains the need to move fiat to serve our clients' needs.” Mickey said the ICBA would also oppose a crypto trust bank acquiring the requisite state money transmission licenses to facilitate payments because it is “outside the scope of what trust banks have traditionally done.” “It's revealing that these companies don't apply for a traditional bank charter. There's nothing that would prevent them from setting up a traditional bank, an FDIC-insured bank,” he said. “I think the reason they go with this sort of nontraditional route is because they view the regulatory and supervisory framework as lighter.”
But the ICBA and other bank trade groups see deeper, more substantive flaws in the OCC’s interpretation that was articulated in the 2020-21 interpretive letters. Those letters, Mickey said, “eliminated a longstanding requirement” that national trust charter holders “engage exclusively in fiduciary activities.” Further, they argue this policy work shouldn’t be conducted in interpretive letters issued by one agency but debated in Congress with supporting legislation. Mickey pointed out that not only is there no law stipulating a modern vision for a national trust bank, there also hasn’t been rulemaking from the OCC for the public to weigh in on.
“There's been no formal attempt to set up the rules of the road. How are these things supervised? What power should they have?” he said. “I think the interpretive letter is pretty much the worst way to go about it from a policy change perspective.”
It's not clear how far they’ll take this argument and how much weight it has under the new agency leadership. Mickey acknowledged that the OCC leadership has “a more favorable view” of crypto than the previous one, but added that in conversations the ICBA has had with the OCC, the agency indicated they’re looking at whether these institutions or their business activities present “unusual risks” to the banking system.
He also wasn’t able to comment on whether the ICBA would sue the OCC over this interpretation. And he couldn’t say whether another party that potentially had standing would sue, but added that the Conference of State Bank Supervisors has been interested in the powers expansion of the national trust charter and how it intersects or overlaps with state-chartered trusts.
To that end, CSBS President and CEO Brandon Milhorn said in a recent speech that the group is “concerned with assertions in Interpretive Letter 1176 that the OCC may grant bank-like powers to national trust companies.”
“Congress carefully delineated the authority of these institutions, and the OCC cannot grant new institutions powers that Congress did not authorize,” he said, later adding: “To ensure a level playing field for traditional banks, however, the OCC must avoid granting these new, uninsured trusts bank-like authorities . . . the ability to take deposits, lend, and engage in payment activities. Only Congress can grant the OCC this authority, and it is simply not found in the National Bank Act.”
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The Fight for the Future of Money |
Right now, the fight over national trust charters is at an impasse. The application review process takes time — it will be interesting (or telling) to see exactly how long the OCC takes to conditionally or fully approve one of these charters. It’ll also be interesting to see when the Fed acts on these master account access applications. In the meantime, I’m sure there will be another letter or two. Maybe there will even be a lawsuit, who knows!
But this question of whether any or all of these crypto companies get a national trust charter is really a question about what the future of the US banking system should look like, what role crypto or stablecoins will play and if their success comes at the expense of traditional commercial banks.
Mickey made it clear that the ICBA is making these arguments today, while crypto is still relatively nascent and Anchorage Digital is still the sole crypto-focused national trust bank. But more competition from more crypto institutions could appeal to more customers to move more deposits outside of banks and into crypto assets or stablecoins that would be held at crypto trust custody. The U.S. Department of the Treasury estimated in April that stablecoins could lead to potentially $6.6 trillion in deposit outflows. Mickey said he doesn’t have “a lot of conviction” about what this outflow could ultimately be, but he thought it could be material to banks. And if that happens, it could reduce a bank’s ability to lend and reinvest funds within its community.
This also begs the question: What should banks do? Their trade groups are already mounting (letter-writing) opposition to these applications, but should that be it? Banks have what these companies want: charters and access to the payment rails. And the OCC currently allows its banks to enter these business lines without needing a nonobjection.
What I don’t always hear when someone expresses concern about crypto-driven deposit outflows from banks is the intent to compete for this business. Most banks aren’t interested in offering their customers crypto asset custody. In Bank Director’s 2025 Technology Survey, only 13% of respondents said their leadership team or board had discussed allocating budget or resources to digital assets, including crypto or stablecoin. Maybe it’s because they’re not sensing a lot of interest from their best or ideal customer, maybe it’s because they don’t realize their customers want this. Who knows.
And maybe that will change: U.S. Bancorp announced in September that it revived a bitcoin custody service for institutional investment managers in partnership with NYDIG as sub-custodian. Maybe in response to the threat of “rewards” on stablecoin balances, banks will pay more for deposits and adjust their operating models and balance sheets for higher funding costs and more robust liquidity. It’s an idea that Liberty Street Economics, the economics blog from the Federal Reserve Bank of New York, floated in their recent post, taking a historical perspective on stablecoins.
“Currently, most retail deposits pay little interest. Moreover, banks charge considerable fees for large instant payments, such as wire fees. However, as stablecoins become more commonly used, the traditional centralized payment system may move to become more attractive in response,” the researchers wrote. “To avoid losing valuable deposits, banks may start to offer better terms on deposits or offer both higher interest and better payment services, just as they did during the National Banking Era.”
If banks aren’t interested in competing for this business, is it fair for them to worry that customers who do want these products and services will leave them for institutions that do offer them? And is that going to be enough customers or deposits to pose a risk to traditional banks? And even if it is enough, is it the job of a regulator to block that activity? Can banks manage competition from this new challenger in the market without learning on a regulatory moat or a lawsuit?
“I think that's what makes this discussion challenging … We don't know how big it gets,” Mickey said. “If it stays at the periphery of the system, then maybe it's not as big of a concern. But if it becomes more mainstream, then the risk [of deposit outflows] gets much larger. But I don't think there's a good way to foresee which of those two it's going to do at this point.”
One thing we can tell from the applications and the opposition to them is that there are at least two competing visions of the future. There’s a world where community banks and their allies ringfence crypto companies and throttle the number of firms and the services they offer. There’s another world where crypto firms are successful in obtaining their national trust charters (and potentially traditional bank charters), and they siphon deposits out of community banks and their communities because digital assets are a better financial product for manifold use cases. There may be a third or fourth vision, something in between the two true believers on each side of these arguments.
For now, we’ll wait to find out. |
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What I’ve been reading, watching and listening to this week: |
⚾️ Curious about: Major League Baseball’s implementation of an automated challenge system for balls and strikes. I am curious about player reactions — players don’t seem to fully trust the robot umps, but also, I kind of think they just like yelling or blaming a human when things don’t go their way.
🏨 Staying at: a lot of hotels because of the fall conference season, so this Instagram reel about hotel room design hits close to home. Also, I travel with a weighted lap pad since I’m now very used to my weighted blanket, and I suspect it looks extremely suspicious in my suitcase. TSA pulling my bag to search it every time I’m at the airport basically negates the time I save with Precheck.
🤖 Did you catch: my latest podcast episode with Todd Phillips about his paper “When Siri Becomes a Deposit Broker”? Community banks are worried about crypto banks and stablecoins, and aren’t thinking at all about their customers using agentic AI to optimize yield, aka sweep their funds around. ✈️ Catch Me At: Money 2020, Oct. 26-29. Please send me your tips and hacks for conference attendance and invites to only cool parties, thanks!
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Thanks for reading! That’s quite enough on crypto for me for the time being; next week will be something completely different. Let me know your thoughts on this piece. – Kiah
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