Ripple, Like Circle, Seeks a Bank Charter. The Crypto Companies' Applications May Be a Slam Dunk. — Barrons.com

By Nate WolfIt seems like every company wants to be a bank these days. Or, at least, every crypto company.This week alone, reports emerged that Circle Internet Group, Ripple Labs, and BitGo have submitted applications to the Office of the Comptroller of the Currency (OCC) to establish national trust banks.The trio serve somewhat different functions within the crypto ecosystem, but they're all jockeying to get in line with shifting federal regulations and claim the spoils of America's banking system. If the OCC's history is anything to go by, their applications likely will be approved.A bank charter has several advantages for the companies, said Jeff Cantwell of Seaport Research Partners, not least of which is fiduciary control of their own assets. Circle, for instance, holds $61.9 billion in both Treasuries and cash at Bank of New York Mellon as backing for its USDC stablecoin. If approved, its new national trust bank would begin overseeing the company's reserves and provide custody services for institutional clients.There are longer-term benefits to a bank charter, too."It also signals that these companies want to be closely tied with any future regulatory developments," Cantwell told Barron's. "And one other potential benefit down the road is it opens the door to eventually accessing the Fed's own payment rails."Ripple, which is the company behind the XRP cryptocurrency and issues the RLUSD stablecoin, already has applied for access to a Federal Reserve's master account, CEO Brad Garlinghouse confirmed Wednesday in a post on social media site X. The move would give the company access to the Fed's 24-hour payment and settlement service — a unique advantage among crypto businesses. It's not difficult to imagine Circle and other companies following suit.The Senate's advancement of the Genius Act in June is one obvious reason for the wave of charter applications. The bill would establish a long-sought-after regulatory framework for stablecoins and require issuers to hold safe, liquid assets in reserve.But another regulatory development — one that's already gone into effect — is a growing friendliness toward crypto at the OCC.The Trump administration appointed longtime bank regulator Rodney E. Hood as the acting comptroller of the currency in February. Within a month, Hood rescinded a 2021 interpretive letter that said banks should receive supervisory approval before engaging in certain crypto-related activities."This rescission is intended to reduce burden, encourage responsible innovation, and enhance transparency," Hood wrote. "The rescission will also ensure that bank activities will be treated consistently, regardless of the underlying technology."Hood has continued to signal a more hands-off approach to crypto in the months since.Circle and Ripple likely wouldn't be applying for bank charters if they didn't think the OCC would approve. In fact, certification has long been a formality for would-be banks.The OCC typically receives a handful of charter applications each year, according to its annual reports. While decisions sometimes stretch into the next calendar year, the agency hasn't denied a new charter since 2009 in the wake of the Financial Crisis."For Circle we think it's most likely going to pass," Cantwell said of the applications. "Ripple could face more scrutiny, potentially, but we think there's also a path to approval for them as well."An OCC spokesperson declined to comment.That's not to say the agency is impotent. The OCC filed 36 enforcement actions against banks in 2024, and its enforcement numbers weren't unusually low during President Donald Trump's first term.But if stablecoin issuers and other crypto companies are, in effect, applying to operate under federal oversight, they must feel their ducks are in a row.The hope now for these companies is they get a head start on their competitors in adapting to the new, albeit much friendlier, regulatory environment. How large that advantage ends up being may depend on how quickly other crypto companies join the queue at the OCC."It becomes a matter of 'evolve or get left behind,'" Seaport's Cantwell said. "And clearly it appears that's how Circle and Ripple are seeing things at the moment."Write to Nate Wolf at [email protected] content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.