Coinbase receives conditional approval for OCC trust charter

• Key insight: Coinbase got conditional approval from the OCC to establish a trust bank subsidiary for assessing institutional money.
• What’s at stake: Bank trade groups have expressed concern that giving charters to crypto firms increases risk exposure, while Comptroller Gould has been pushing for “diversity” in the finance sector.
• Expert quote: “The conditional approvals reflect the OCC’s leading role in defining how crypto activities will operate within the traditional bank regulatory system.” —Klaros Group’s Michele Alt

Coinbase is now the latest cryptocurrency exchange to receive conditional approval for a national trust bank charter from the Office of the Comptroller of the Currency.

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Coinbase, the largest digital currency exchange in the U.S., announced the conditional approval in a blog post on Thursday.

“This approval is a result of years of investment in compliance, regulatory engagement and a firm belief that the right path for crypto is through the system,” Greg Tusar, head of institutional finance for Coinbase, said in a statement.

Coinbase initially filed its national trust charter application to the OCC on Oct. 3, joining the ranks of other crypto-related firms including Circle, Ripple and Paxos, which were all approved last December. Other crypto firms that have received approval in recent months include Stripe-owned Bridge and Crypto.com.

“Collectively, these conditional approvals reflect the OCC’s leading role in defining how crypto activities will operate within the traditional bank regulatory system,” Klaros Group partner Michele Alt told American Banker. “Those definitions include the conditions placed on these national trust bank approvals. The thing to watch now is whether, and how, Coinbase and the other recently approved national trust banks satisfy those conditions in order to open for business.”

Paul Grewal, Coinbase’s chief legal officer, celebrated the approval in a post on X.

Nick Puckrin, co-founder of Coin Bureau, told American Banker that Coinbase getting conditional approval for a national trust charter is “yet another sign” that the crypto system and the traditional financial system are converging. 

“For Coinbase, this opens the doors to institutional money, which is where most of the interest in digital assets is coming from in the current market,” he said.

Crypto trust charters have been a contentious topic in the banking regulation space, as Comptroller Jonathan Gould has defended the statutory scope of the approvals and bank trade groups have pushed back against what they perceive as a threat to the stability of the financial industry. 

Patrick Woodall, managing director at Americans for Financial Reform Education Fund, said in a statement on Thursday that the organization believes granting Coinbase a charter increases the risk of financial crisis.

“The rush to grant bank charters to crypto companies like Coinbase, and to hand them many of the privileges of being a bank without corresponding oversight, is dangerous and destabilizing,” Woodall said. “It will expose the broader financial system to the caustic volatility, fraud and money laundering endemic to crypto markets. This approval also ignores a century of federal law, regulation, and jurisprudence regarding trust charters.”

Letters of opposition from multiple bank trade groups regarding Coinbase’s charter application were filed with the agency last fall, including from the Independent Community Bankers of America, or ICBA.

“Today’s conditional approval of Coinbase’s trust charter application is a grave mistake that will only serve to put U.S. consumers at risk,” ICBA President and CEO Rebeca Romero Rainey said in a statement published Thursday afternoon. “We also continue to have significant concerns with the OCC’s chartering rule for national trust banks, which is inconsistent with its statutory authority laid out in legislative history, judicial interpretations and the agency’s own internal precedent.”

Gould said in a fireside chat at the Digital Asset Summit last week that crypto rules from the agency are seeking to “level the playing field” in the U.S. financial services system.

“The U.S. financial services system, of which banks are a part, and the U.S. economy has been well served by having a both dynamic and diverse banking system,” he said. “We’ve had almost no new bank formation in this country over the last 18 years. I’m very focused on undoing those trends.

“We will evaluate applicants on a case by case basis, based on the statutory factors that were given and the written procedure that we ourselves say we apply to the process,” he continued.

Other crypto firms are also continuing to join the lineup for trust charters. EDX Markets announced on Thursday that it has filed an application with the OCC to establish a trust bank subsidiary, and Zerohash applied for a crypto trust charter last month.

“Crypto custody is the golden goose,” Puckrin said. “It promises to bring in those institutional flows, so it makes sense that the list of firms applying for national banking charters is growing, with EDX Markets now joining the waiting list.”

Even with the trust charter approval, Coinbase is not actively seeking to become a traditional bank.

“Coinbase is not becoming a commercial bank,” Tusar said in the blog post. “We will not be taking retail deposits. We will not be engaging in fractional reserve banking.”

Chris Sidler, a partner at FS Vector, told American Banker that the approval is a key step toward Coinbase’s digital asset custody aspirations.

“Coinbase will be looking closely at what conditions it will have to satisfy in the months ahead, prior to getting full approval to operate,” he said. “This could involve enhancements to risk and compliance, oversight and any other areas that the OCC deems necessary for a safe and sound bank.”

Tusar also said that Coinbase’s BitLicense and state trust charters issued under the New York Department of Financial Services, or NYDFS, are still active. 

“Since 2015, the NYDFS BitLicense framework has been a cornerstone of how Coinbase built operational maturity and institutional trust,” he said. “Coinbase will continue to operate under NYDFS oversight.”

Joey Pizzolato contributed reporting to this article.