Earlier this month, the Federal Reserve Board put forth a proposed new set of criteria for evaluating “novel institutions” that wish to access the Fed’s payment and account services.
At this point, the guidance is only a proposal and is not yet in effect. It will be open for public comment for 60 days, at which point it will undergo a revision process that could last several months or more. However, the act of making the new draft standards public does indicate a genuine interest in extending services to and providing financial services to non-traditional participants, particularly those using emerging technologies.
As the central bank of the United States, the Federal Reserve is the hub for the country’s financial institutions to transact with each other. For example, they need to have an account with the Fed to use the Automated Clearing House (ACH).
Some non-bank institutions work with federally chartered banks to access Fed services, but this adds another layer of delay and expense. This is a dilemma crypto companies have been facing. From an advocate’s perspective, it undercuts the potential efficiency of the technology through the involvement of third parties.
This situation is at the heart of the U.S. OCC’s push to expand its fintech charter and offer banking licenses to companies like Anchorage, Protego, Paxos and others, which has the industry’s supporters and stakeholders exceptionally excited.
The guidance itself certainly places a premium on technological advances in general. The guide notes that “the payments space is rapidly evolving as technological advances and other factors lead to the introduction of new financial products and services, as well as different ways of providing traditional banking services. Related to this is the recent increase in new types of concessions approved or considered nationwide, and as a result, the Federal Reserve is receiving an increasing number of inquiries and requests from new types of institutions for access to accounts and services.”
There is no direct reference to cryptocurrencies (crypto), and the Fed does not identify companies or specific technologies throughout the document, nor does it use broader phrases such as “financial technologies” or “fintech. The Fed does not identify companies or specific technologies throughout the document, nor does it use broader phrases such as “financial technologies” or “fintech. Regulators like the buzzword “tech-neutral,” which may explain why the Fed’s guidance is somewhat ambiguous. When The Block contacted the Fed for comment, a representative likewise declined to confirm or deny any involvement by chartered institutions or firms in driving the initiative.
So what are these new types of institutions?
But someone in the crypto industry itself confirmed involvement.
In a statement, Kraken Bank CEO David Kinitsky noted that the company’s Wyoming-based chartered bank “is exactly the kind of forward-looking license that the Fed’s recently proposed guidelines are designed to address.” He further confirmed the company’s intention to “move forward with our own master account application.
U.S. Senator Cynthia Lummis was also quick to mention Wyoming’s crypto-friendly Special Purpose Depository Institution (SPDI) charter license as a reminder of the Fed’s guidelines. “Wyoming has developed the best regulatory framework for digital assets in the United States. I am proud that the Federal Reserve thoughtfully considered Wyoming’s leadership position.”
But the relationship is less clear for the OCC’s federally chartered license. anchorage, the first digital asset company to receive a national bank charter, declined to comment on the new guidelines. a representative for paxos said the company had no advance notice of the fed’s proposal. paxos, which operates on the basis of a new york bank trust and in april Paxos operates under the New York Bank Trust and received conditional approval for a charter license from the OCC at the end of April.
The different prospects for national and state licenses
For its part, the OCC is facing changes at the regulatory level. U.S. Treasury Secretary Janet Yellen appointed Michael Hsu as the new acting Administrator last week, and May 10 was his first official day on the job.
While it was in fact the Obama-era OCC that first pushed for a national fintech charter license, the process has accelerated significantly in the last year under Brian Brooks, whose work during his tenure has resulted in a solid position in the crypto community. He joined the OCC after leaving the Coinbase legal team and became CEO of Binance US after his departure.
Unfortunately, Brooks became the target of Congressional Democrats’ ire on the U.S. House Financial Services Committee as far as fintech licensing is concerned. With the end of former U.S. President Donald Trump’s term in office, there is strong political pressure to repeal the previous actions of Brooks and former OCC Administrator Joseph Otting.
On May 11, the U.S. Senate passed a resolution to rescind Brooks’ “True Lender” rule, which is expected to face minimal resistance in the House of Representatives. The House Financial Services Committee has already signaled similar opposition to the OCC’s recent charter license.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/what-do-the-feds-proposed-standards-for-new-types-of-institutions-mean-for-crypto-banks/
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