Coinbase Moves Toward National Trust Company Approval
Coinbase (COIN) announced on Thursday that it has gained initial approval from the U.S. Office of the Comptroller of the Currency (OCC) to establish a National Trust company. This marks a significant step for the company in its ambitions to function as a federally regulated cryptocurrency custodian, according to reports from Bloomberg.
However, this approval is not definitive. It acts as a conditional endorsement, highlighting the various requirements that Coinbase will need to fulfill before being granted full authorization. These prerequisites usually involve developing compliance frameworks, hiring essential staff, and undergoing thorough regulatory assessments. The OCC also anticipates that companies must demonstrate their capacity to manage risks effectively, safeguard customer assets, and adhere to anti-money laundering protocols. Full approval will only be given once all these requirements are met.
“Final approval is still required…until we receive final approval, our business will not operate under the OCC Charter,” Coinbase’s Chief Legal Officer, Paul Grewal, stated in an interview. “This next phase will allow us to learn more about how we can scale our business in exciting and important ways for the development of cryptocurrencies.”
If the charter is ultimately granted, Coinbase would operate an uninsured National Trust company. This framework would enable the company to hold digital assets on behalf of its clients, although it would not allow for making deposits or lending.
Coinbase first filed for this authorization back in October, coinciding with applications from other companies like Ripple. Most recently, the Citadel-backed exchange, EDX Markets, has indicated its intention to apply for a similar structure. This trend reflects a growing demand for regulated custody as larger investors venture into the crypto space.
For institutional investors, custody often hinges more on trust than on the mechanics of transaction. For instance, a pension fund might seek exposure to Bitcoin but would require a regulated entity to securely hold that asset. A federal charter can offer assurances that a state charter may not provide.
This development aligns with Coinbase’s strategy to lessen its dependency on transaction fees, which can be quite variable depending on market conditions. Custody services present a more reliable source of income. The company already provides custodial services for multiple spot Bitcoin exchange-traded funds in the U.S., overseeing the assets on behalf of fund managers.
“The big opportunity going forward will be payments…custody is contiguous but separate,” Grewal remarked, adding that they believe they can offer a much wider array of products and services than in the past.
