OCC Economist cites the advantages of issuing financial institution certificates to stablecoin suppliers

The chief economist of the Office of the Comptroller of the Currency (OCC), a banking regulator in the US Treasury Department, believes that issuing national bank deeds to “shadow fintech banks” could bring “significant benefits”.

In an article titled “Chartering the FinTech Future,” Charles Calomiris explained how stable coin providers, chartered as banks that do not rely on deposit funding, would themselves benefit from supervision.

Such companies would benefit from "getting out of the shadows," he wrote, with geographic reach and market credibility outweighing the additional cost burden of regulation.

The banking system and its consumers would also benefit, according to Calomiris, if they evolved from a regulated network of "coin banks of stable value that issue non-custodial liabilities" over the next few decades with the added benefits of efficiency, convenience and stability.

"It would be desirable to allow such banks to receive national bank certificates," concluded Calomiris.

The term “shadow banking” refers to financial intermediaries who enable credit to be created within the global financial system but are not subject to regulatory oversight. Stablecoin issuers are treated as such entities in the publication.

"At OCC, we know that new technologies and consumer preferences, not regulators, will determine the future of banking," wrote Calomiris.

Future threats

The Calomiris paper also examined the Fed's impact on money power and its potential to oppose fintech banks.

"The Federal Reserve is a very powerful organization that will lose its monopoly on the payment system as blockchain-based networks develop," wrote Calomiris. "One can hope that the Fed will be guided more by the public interest than by the desire to maintain its own power."

Calomiris wrote that, as far as he knew, the Fed had not yet taken an official position on fintech chartering. "Time will tell," he wrote.

However, he suggested that both politics and business will decide whether consumers will ever benefit from a “chartered FinTech future”.

"When considering whether or not shadow FinTech banks, including stable coin providers, will at some point become an important part of the chartered banking system, it is critical to consider the political power of special interests that can be lost as a result," said Calomiris.

The OCC, led by former Coinbase manager Brian Brooks, has recently taken a particularly crypto-friendly stance in its politics. In July, the office issued a letter in which nationally chartered banks in the US offer custody services for cryptocurrencies.

Brooks has also been reported to be pushing a plan to offer national bank charters to payment banks that don't make deposits in September. Brooks said at the time it could potentially consider companies like PayPal and Coinbase.

In the past few months, a number of crypto and blockchain companies have applied to the OCC as state-regulated banks in the US, including BitPay, Anchorage, and Paxos. Kraken and Avanti are already the first crypto-native banks in the US, although they received state charters from the Wyoming Division of Banking, not nationwide through the OCC.

See Also: Paxos Becomes Latest Crypto Firm To Submit Federal Bank Charter

In the newspaper, Calomiris said the OCC is also considering expanding the national banking charter to include stable coin providers. However, under Joe Biden's presidency starting next year, the OCC's plans could be pushed back at a high level. In early December, Rep. Maxine Waters, chairwoman of the House Financial Services Committee, wrote a letter asking Biden to repeal or oversee any guidelines issued by the OCC on cryptocurrency issues.

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