Financial Firms Eye Banks as Trump Shakes Up Regulations

• The Trump administration offers a more open environment for fintech and crypto firms.  
• Bank charters move forward to help companies cut costs and increase consumer trust.  
• Several crypto companies have already managed to secure bank charters in recent years.

Financial technology and cryptocurrency companies are exploring the possibility of becoming state or national banks, driven by a more favorable regulatory environment under the Trump administration. This shift comes as businesses see an opportunity to grow under a government perceived as more industry-friendly, especially in sectors like crypto.

In an interview, Alexandra Steinberg Barrage, a partner at the law firm Troutman Pepper Locke stated that the firm is working on several bank charter applications. Her statement reflects that despite increased interest, businesses are proceeding cautiously as new banking officials are appointed by the administration.

Increased Regulatory Flexibility Under Trump

In a bid to boost the sector, the administration’s approach to the financial industry is less hectic than its previous administration. This stands in stark contrast to the rather stricter regulatory regime that followed the 2008 financial crisis. Companies can now apply for bank charters in a much better environment than before and need not wait for longer periods to receive a license for an application.

Between 2000 to 2007, the average annual approval rate for bank charter applications was 144. However, between 2010 and 2023, the number sunk sharply to an average of just five annually while scrutiny increased. With new personnel being appointed, financial institutions anticipate a faster approval process under the present administration.

Chainlink CEO Sergey Nazarov commended the Trump administration’s recent policy shift towards digital assets. He viewed it as a pivotal step to bolster the U.S.’s standing in global finance. Nazarov expressed gratitude for the administration’s renewed engagement with the crypto industry, highlighting that this change could unlock the sector’s full potential. He emphasized the importance of the U.S. maintaining leadership in the evolving financial landscape shaped by blockchain and digital assets.

Crypto and Fintech Companies Taking Advantage

There are significant benefits to obtaining a bank charter. Companies can reduce operating expenses and capital costs while gaining greater credibility, which in turn, increases trust with consumers, a key factor for expanding businesses. 

Carleton Goss, a lawyer at Hunton Andrews Kurth, shared insights from his firm’s work on several such applications. He pointed out that gaining a bank charter allows businesses to access lower borrowing rates by leveraging into deposits, providing a critical financial advantage. Moreover, new banks could enhance competition within the financial industry, benefiting specific clientele and regions.  

Related: US Bitcoin Reserve Could Trigger Financial Crisis: Villeroy

SmartBiz Acquires Centrust Bank, Setting a Precedent

A notable representation of this trend was witnessed in the recent approval of SmartBiz’s purchase of Centrust Bank, a community bank in Chicago. This approval marks the first national bank charter granted to a fintech company since 2021. The Office of the Comptroller of the Currency has pointed out this trend as indicative of the increasing cultural willingness of fintech and cryptocurrency firms to apply for conventional bank charters.

Several cryptocurrency firms have already pursued and received bank charters in recent years. In 2020, the crypto exchange Kraken secured a bank charter in Wyoming, followed by Anchorage Digital Bank, which received its charter in 2021.

While obtaining a bank charter is a significant milestone, it also presents challenges. For crypto businesses, the process is particularly complex, as they must comply with the Bank Secrecy Act and Anti-Money Laundering regulations. Further, centralized banking supervision contradicts the decentralized nature of cryptocurrencies, making the transition even more intricate. 

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