Bloomberg News
While more and more cryptography companies require charters of the national trust, banks have alarms.
PAXOS, a non-banking financial company focused on crypto-connu, formerly itbit,
But Paxos is only the last non -banking crypto company to look for a national trust charter: Ripple, which operates Altcoin XRP,
This growing interest in the charters of confidence in cryptographic companies has drawn the attention of the banking industry. Last month, the American Bankers Association
“Based on the examination by the limited information associations included in the public parties of requests, associations believe that there are important political and legal questions as to whether the business plans proposed by applicants involve the types of trust activities carried out by national trust banks,” said the ABA letter. “The granting of these requests could represent a fundamental departure from the previous existing West, and associations firmly believe that such a departure requires the contribution of the public.”
The criticisms of the fintech authorization to win national trusted charters argue that the move grants competitive advantages of Crypto and Fintech companies without the same surveillance, the same protection of the FDIC or the Congress mandate facing traditional banks. Some candidates have even proposed to use this authority to allow customers to access the funds held in trust with a debit card – an idea that the banking sector expresses votes like Mickey Marshall, regulatory lawyer among independent community bankers in America, stretches the initial intention of the charter.
“If you now have this national trust bank which has funds in a sort of stable value account, investing them in titles on behalf of the customer, but the customer can access these funds with a debit card, which is starting to look much like a traditional deposit relationship,” said Marshall. “And now starts to compete with a bank for deposits in a way that trusts banks traditionally.”
Trusted companies are not new, but they have historically served a niche on the financial market, allowing financial institutions to provide childcare services to their customers, such as trust and inheritance management.
Who changed after a West
This potentially wide discount for companies with a national trust charter allows these companies a new way in banking services, which, according to Marshall, could create a variety of risks for industry as well as damage to consumers. The ICBA calls for official regulations on the issue, since the scope of the charter has been extended in a relatively unilateral way.
“There should be a clear intention of the Congress … In the absence, at the very least, there should be regulations so that the West can obtain comments … Essentially exposed a clearer framework of the rules if these national trusts propose products of the deposit type,” said Marshall. “” Here are the exams that we are going to do to ensure that they have good assets, here are the things we are going to do to make sure they protect customer data … In the absence of any type of formal regulation, we do not really have any answers to some of these questions. “”
Banking defenders also fear that the growth of stablecoins could siphon billions of basic deposits in community banks, undergoing their ability to finance local loans. An estimate of the Treasury provides that stabbed could reach more than $ 6 billions of volume, a tectonic change from the financial system which fears that banks would mainly hold bank deposits, reducing the profitability of banks and, according to Marshall, their ability to stimulate economic growth.
“These deposits, when they arise from community banks, reduce the capacity of these community banks to lend in their communities,” said Marshall. “It is less money that they have to make loans to small businesses, small agricultural loans, mortgage loans, because this money enters these Stablecoin reserves, where it is essentially treasury bills. And therefore the purchase of treasury bills does not have the same level of community impact, does not create the same level of economic growth, for example, that not all commercial loans have.”
The defenders of Fintech say that the charters of the national trust do not create flaws but rather promote competition and innovation. Penny Lee, president and chief executive officer of the Financial Technology Association, who represents Fintechs, maintains that the WOID framework provides a legitimate path for new commercial models which can better serve customers to enter the banking sector.
“The charters of national trust and other tailor -made charters promote competition and innovation in the banking sector,” said Lee. “Allow the emergence of new commercial models and specialized institutions that can better meet the evolutionary needs of consumers and businesses.”
Jesse Van Tol, president and chief executive officer of the National Community Reinvestment Coalition, a group for the defense of consumers and the community, said that the granting of national charters to cryptographic companies could weaken consumers’ protections by allowing them to bypass stronger state level guarantees. They argue that if the administration should grant the pre -emption of the main laws on consumer protection, the fintechs responsible for trust could work with little responsibility in states where protections exceed federal standards.
“I think that a major concern would be if this administration was to grant the pre -emption of major consumer protection laws for a national trust charter, then these companies could operate with impunity for consumer protection laws,” said Van Tol.
But Lee said that the concerns concerning fintechs obtaining an inner track on the banks are exaggerated and that the beneficiaries of trust charters would be under the jurisdiction of the OCS and the applicable banking laws.
“Financial technology companies operate in the same regulatory executives based on activities and based on entities that apply to the entire American financial services industry and have done so for many decades,” said Lee. “These requirements are adapted to reduce operational risks, liquidity, investment, financial crime and consumer protection.”
Banking groups also warn that charters could mislead consumers by believing that their money has the same protections as deposits in traditional banks. Marshall is counteracting that customers can see an institution regulated by the WC which is called a bank and assume that their funds are assured, while in reality, national trust banks are not a protection of the FDIC and are not supervised in the same way as the insured banks.
“A customer can see that this is regulated by the OCC, his name is a bank and thinks:” I have the same protections here that I do with a national bank “,” said Marshall. “But this is not the case, because it is not technically a deposit, it is not assured of the FDIC (and) the bank is not examined and supervised in the same way as an assured bank of the FDIC would be. If there is a kind of insolvency in the establishment, if there is fraud or hacking in the institution, the funds of customers would not be protected in the same way as crypto companies Not safe from scams or not safe from fraud, and there could be failures there.
Van Tol is suitable that consumers may find it difficult to understand the technical difference between a national trust company and a traditional bank with deposit insurance, and added that national trust banks are not subject to the Community reinvestment Act, an anti-refus law which obliges banks to lend to the various customers of customers in the communities in which they operate.
“Although technically, they will not have deposit insurance, winning the printur the government – the approval seal that a charter brings – potentially creates the perception that your money is sure if he is held in a stablecoin with a company that has a trust charter,” said Van Tol. “The average consumer does not understand what a stablecoin is, he will just look like most people experience their real deposits today … A number in their account issued by an approved institution … How will it be distinguished?”
