Coinbase Receives Conditional Approval to Operate as a Trust Bank
On Thursday, Coinbase announced that it has gained conditional approval from the U.S. Office of the Comptroller of the Currency (OCC) to function as a trust bank.
Paul Grewal, the company’s chief legal officer, shared with CNBC that once formalized, crypto exchanges would have the ability to provide payment products along with custody services under federal oversight.
“Looking ahead, I believe we could collaborate with the OCC to not just focus on custody but also develop infrastructure products, especially in payments, to expand and enhance crypto payment options in various, maybe even unexpected, directions,” Grewal mentioned.
However, he clarified that Coinbase does not plan to become a commercial bank and will not accept retail deposits or partake in fractional reserve banking, a method used by larger banks where they only keep a fraction of deposits on hand as reserves and lend out the remaining funds. Nevertheless, acquiring a trust charter would grant Coinbase legal authority and better access to banking infrastructure, potentially positioning it to compete with established players like PayPal or Square.
This approval is considered a preliminary agreement indicating that Coinbase’s application aligns with significant regulatory standards but is contingent on meeting specific conditions before becoming operational as a trust bank.
With this new designation, Coinbase will be directly regulated by the OCC, one of the primary federal banking regulators, contrasting with the often cumbersome state-based regulations that can challenge rapidly evolving sectors like cryptocurrency.
Grewal highlighted that this route was “the only feasible solution,” reflecting remarks made by President Trump about establishing the U.S. as the “crypto capital of the world” during his presidency. In contrast, the Biden administration has taken a less favorable stance on crypto, which some in the industry feel is hindering growth and the U.S.’s standing on the global stage.
Many fast-paced startups find navigating state-by-state regulations to be a cumbersome task. Instead of having one unified set of rules, they face around 50 variations, complicating operations and driving up costs.
“We wouldn’t have pursued this if we did not see major opportunities in advancing crypto infrastructure, particularly in payments,” Grewal stated. “This conditional approval from the OCC signals a recognition that it seeks to foster the development of payment and storage products here in the United States.”
Coinbase has formulated a payments strategy focused on the integration of stablecoins, notably the USDC issued by Circle. Last year, the company rolled out Coinbase Payments, a platform designed for merchants that features wallet integration and stablecoin checkouts. They have also created payment protocols in collaboration with Shopify built on a proprietary blockchain and teamed up with Shopify and Stripe to allow merchant partners to accept USDC stablecoins.
Brian Armstrong, the CEO of Coinbase, expressed aspirations to position USDC as the leading stablecoin globally. He has also declared his ambition for Coinbase to evolve into the top financial services app in the coming years, while also becoming a significant voice on Capitol Hill regarding crypto policy, particularly during discussions about the Clarity Act.
