A storm is brewing between state regulators and the OCC over fintech licensing

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A leading association of state banking regulators is trying to replace the US national banking regulator on fintech registration.

According to a filing on Dec. 22, the Conference of State Bank Supervisors (CSBS) says Figure Technology’s upcoming approval of Figure Technology’s bank charter is a bridge too far. Figure operates blockchain-based credit and securities services. At the beginning of November she announced the application for a charter to the office of the currency auditor. At that time, CEO Mike Cagney noted the relative convenience of a national charter and said, “We’ll have over 200 state licenses without such a charter next year.”

The OCC, the tax office responsible for the national banks, launched the idea of ​​bank charters for fintech companies in 2016 under the then Comptroller Thomas Curry. State regulators, including the CSBS and the New York Treasury Department (NYDFS), immediately classified the proposal as a violation of the definition of “bank” and a violation of the OCC’s own charter. The CSBS, for example, resolutely refers to the work of the OCC as the “Nonbank Charter Program”.

From the perspective of the CSBS, the situation only worsened in July 2018 when the then Comptroller Joseph Otting said that the OCC was open to applications. CSBS filed another lawsuit later that year.

The court finally dismissed the case on the grounds that “CSBS still has no position and its claims remain immature.” In this decision, however, the court attributed this “immaturity” to the fact that no fintech had yet applied for a charter, let alone received one.

A month later, a Manhattan judge ruled in the final ruling in the NYDFS case that the OCC’s legal authority “over all fintech applicants seeking a national banking charter that does not accept deposits” would be removed, which unites the OCC Blow staggered.

While the OCC appealed the NYDFS case to the second circuit, the CSBS is using the Figure application to attack the entire program and look for:

“Declarative and injunction declaring the OCC’s Nonbank Charter Program and Figure Charter illegal and prohibiting the OCC from making, accepting, or approving applications for nonbank charters, including the Figure Charter application.”

Margaret Liu, CSBS senior vice president and assistant general counsel, told Cointelegraph that Figure’s particular business was not the problem. The company is only the first fintech company to get so far in OCC licensing that “the problem is more than ripe”. She continued: “The timing is related to the fact that a company has submitted a final application. This is not about figure. “

At the center of the argument is the question of whether a financial company that does not hold any deposits as shown in the figure can be considered a bank and is therefore subject to the national jurisdiction of the OCC. As early as 2018, Otting’s announcement claimed that the OCC was already authorized to “charter companies that perform one of the core functions of banking (paying checks, lending money, or accepting deposits)” for which these banks do not necessarily have deposits had to make. This exempts these banks from requirements like holding FDIC insurance and possibly Federal Reserve Board oversight.

The CSBS disagrees. “We are suing for the same reason we sued all along,” Margaret Liu told Cointelegraph. “Being a regulator doesn’t mean you can redefine what a bank is.” Yesterday’s complaint states:

“It is well regulated by court precedent, Bundesbank laws, and historical charter practice that in order to lawfully begin ‘banking’ under the NBA, a national bank must receive at least deposits and apply for federal issuance and acquisition Deposit insurance. “

A representative from the OCC declined to comment on the litigation.

In September, the CSBS announced a new program designed to simplify the registration process for national companies that want to obtain licenses in many countries. At that time, Brooks congratulated the conference on:

“Given what we’ve been saying for years that it makes little sense for national financial services companies to have a patchwork of regulation and oversight. As efforts alleviate the inherent challenges faced by a system based on 50 state laws and licensing systems based, federal level only The law and the unified legal framework it provides fully address these issues. “

Obviously, the CSBS and OCC have different ideas about what a uniform legal framework means.

For his part, Brooks has made the OCC a beacon of crypto regulation at the federal level since joining the office from Coinbase’s legal team in March. Although President Trump recently named him full computer, the appointment is still pending Senate confirmation. With a new Congress convening in less than a month, there is still no word on whether the Senate deems it appropriate to plan for it.