Why Every Company Suddenly Wants to Become a Bank — WSJ
By Dylan TokarLast year, Ripple Chief Executive Brad Garlinghouse had a bone to pick with banks, saying they had shut him and his industry out. This year, his cryptocurrency company is asking the Trump administration for permission to start its own bank.Ripple isn't the only company that suddenly wants to be a bank. Under Trump, crypto firms and fintechs including Coinbase and Wise are looking to open banks and retailers such as Amazon and Walmart are eyeing expansions of banklike services. Trump-appointed regulators are welcoming their efforts, taking cues from a crypto-friendly administration that has said it wants to remove barriers to new payments systems."My view is that it's better for it to be done within the banking system, if it's legally permissible and can be done in a safe and sound manner," Comptroller of the Currency Jonathan Gould said of cryptocurrency at a conference last month. Gould's agency, part of the Treasury Department, regulates nationally-chartered U.S. banks.Most of the new applications are for national trust charters. Trust banks differ from full banks in that they generally cannot take deposits or make loans. Instead, trusts charge fees for the safekeeping of customer assets. Since they don't take deposits, they typically aren't insured like full banks.So far this year, there have been 12 applications for trust charters, more than any in at least the preceding eight years, according to data compiled by Klaros Group, a financial-services advisory firm.In addition to Ripple, Coinbase and the U.K. payments company Wise, other applicants for trust charters include Sony Bank, a Japanese commercial bank whose parent company is partially owned by the electronics and entertainment conglomerate.Banking lobby groups argue that approving the flood of applications could threaten the stability of the financial system. They say companies such as Ripple want to compete for banks' customers without shouldering the same regulatory oversight, such as stringent capital requirements. Other critics of looser regulation point out that since the 2008-09 financial crisis, regulators have been highly restrictive about who could launch a bank and what banks can do — for good reason, they say.The Bank Policy Institute in recent weeks sent letters urging the Office of the Comptroller of the Currency to reject the Ripple, Wise and Sony applications, among others. The Independent Community Bankers of America, a trade group representing smaller banks, also wrote in opposition.BPI said approval of the application from Coinbase, a crypto exchange, "could significantly increase risks to the U.S. financial system."Faryar Shirzad, Coinbase's chief policy officer, dismissed BPI's concerns, saying the group was just trying to protect banks' business interests.Some of the applicants have had contentious relationships with banks of late. Allegations of "debanking" by crypto industry participants such as Garlinghouse helped spark an executive order by President Trump targeting politicized account closures.The crypto companies seeking charters say they would provide fiduciary services to customers whose digital assets they hold and issue stablecoins, a cryptocurrency designed to maintain a fixed value. They argue more regulation is the point, since it helps them market services to Wall Street firms that want to offer crypto products but prefer to partner with regulated entities.The fight over chartering is tied in part to deeper anxieties among banks about stablecoins. If stablecoins become popular with consumers, major retailers could use them to provide their own payment methods or other banking services. That could open the door to cutting out banks and credit-card companies.Amazon and Walmart are among a number of large companies, including airlines, that were exploring whether to issue their own stablecoins, The Wall Street Journal previously reported.Since then, Trump signed the Genius Act, a bill that tasks the OCC with approving and overseeing U.S. stablecoin issuers. The act doesn't require a bank charter to issue stablecoins but in most cases stablecoin issuers must be financial firms. That could mean some companies will find partners to work with rather than issue their own.Stablecoins aren't the only pathway for commercial companies to push deeper into banking. The Federal Deposit Insurance Corp. earlier this year said it would revisit its stance on so-called industrial loan charters. Those charters, granted by various states, have been used over time by a range of businesses including car manufacturers such as Toyota to help customers finance purchases.The review is widely expected to consider whether such charters should be made more available.Write to Dylan Tokar at [email protected]