A leading association of state banking regulators is trying to put the US national banking regulator in its place on the issue of fintech registration.
As of December 22 Submit, the Conference of State Bank Supervisors, or CSBS, says Figure Technology’s forthcoming approval of Figure Technology’s bank charter is a bridge too far. Figure works blockchain-backed loans and investment services. It announced his application at the Office of the Comptroller of the Currency for a charter in early November. At the time, CEO Mike Cagney noted the relative convenience of a national charter, saying, “We will have more than 200 state licenses next year without such a charter.”
The OCC, the Ministry of Finance responsible for the national banks, was the first to put forward the idea of a special purpose bank charters for fintech companies in 2016 under then-auditor Thomas Curry. State regulators, including the CSBS and the New York Department of Financial Services, or NYDFS, immediately pursued the proposal as violating the definition of “bank,” as well as in violating the OCC’s own charter. For example, the CSBS firmly refers to the work of the OCC as “the Nonbank Charter Program”.
From the perspective of the CSBS, the situation only got worse in July 2018, when then-controller Joseph Otting said the OCC was open to applications. CSBS filed another lawsuit later that year.
The court ultimately dismissed the case on the grounds that “CSBS still lacks prestige and its claims remain unripe”. In that ruling, however, the court attributed that “immaturity” to the fact that no fintech had yet applied for a charter, let alone received one.
A month later in the final verdict in the NYDFS case comes a judge in Manhattan found it that the OCCs legal authority “is brushed aside with regard to all fintech applicants seeking a national bank charter that does not accept deposits,” hitting the OCC.
But while the OCC has appealed the NYDFS case to the second circuit, the CSBS uses the Figure application to attack the entire program, looking for:
“Declaratory and Interim Relief Provisions invalidating the OCC’s Nonbank Charter Program and Figure Charter and prohibiting the OCC from soliciting, accepting or approving applications for Nonbank Charters, including the Figure Charter Application.”
Margaret Liu, CSBS’s senior vice president and deputy general counsel, told Cointelegraph that Figure’s specifics aren’t the problem. The company is just the first fintech to get this far in licensing from the OCC, making “the issue more than ripe.” She continued: “The timing has to do with that a company has submitted a final application. This is not about figure. “
Central to the argument is whether a financial entity that does not hold deposits, such as Figure, can be considered a bank and thus falls under the national jurisdiction of the OCC. In 2018, Otting’s announcement claimed that the OCC already had the authority to “ charter companies engaged in any of the most important banking functions (paying checks, lending money, or taking deposits), ” which did not necessarily require those banks to take deposits. . This frees those banks from requirements such as holding FDIC insurance and possibly Federal Reserve Board oversight.
The CSBS does not agree. “We are complaining for the same reason we have been suing all along,” Margaret Liu told Cointelegraph. “Being a regulator doesn’t mean you have to redefine what a bank is.” Yesterday’s complaint states:
“ It is well regulated by court precedents, federal banking laws, and historic chartering practices that in order to legally begin banking under the NBA, a national bank must at least receive deposits and federal deposit guarantees. “
A representative of the OCC declined to comment on the dispute.
In September, the CSBS announced a new program that would simplify the registration process for national companies seeking licenses in many states. Brooks at the time congratulated the conference on:
“Recognizing what we’ve been saying for years that it makes little sense for national financial services firms to have a patchwork of regulation and supervision. While the efforts alleviate the inherent challenges facing a system based on 50 state laws and licensing regimes, only federal law and the unified regulatory framework it provides fully address these issues. ”
It is clear that the CSBS and OCC have different ideas about what a unified regulatory framework means.
Brooks, for his part, has the OCC one beacon of crypto regulation at the federal level since joining the office of Coinbase’s legal team in March. Although President Trump recently nominated him to become full auditor, the nomination is still awaiting confirmation by the Senate. With a new Congress meeting in less than a month, there’s still no word on whether the Senate sees fit to schedule it.
