Crypto firms aiming for banking licenses under Trump administration

Fintech and crypto firms are actively pursuing state and national banking licenses under President Donald Trump’s administration to gain regulatory approval that was previously slow to materialize. 

According to a Reuters report, industry executives indicate that firms seeking credibility and market expansion see a favorable landscape under the administration, which has forced regulators to transition from their cautious stance toward crypto.

Increased interest in banking licenses

New banking entrants increase industry competition and cater to niche market segments. Analysts and industry participants indicate that financial institutions launched by fintech and crypto firms could address underserved customer bases. 

Moreover, legal professionals working on banking charter applications confirm a rising interest.

Alexandra Steinberg Barrage, a partner at Troutman Pepper Locke, noted that multiple applications are in progress, though firms remain cautiously optimistic as regulatory leadership settles. 

The report mentions two additional sources working on similar applications that observed a significant uptick in discussions and preparatory work for bank charters. However, the extent of follow-through remains uncertain.

Becoming a licensed bank presents additional regulatory scrutiny but offers strategic benefits. A banking license lowers borrowing costs, improves capital access, and enhances legitimacy in customers’ eyes. 

Carleton Goss, a partner at Hunton Andrews Kurth, emphasized the ability to reduce borrowing costs by drawing on deposits as a key advantage. His firm is currently assisting with three such applications.

Improving regulatory environment

Regulatory leaders installed by Trump’s administration have highlighted financial technology innovation. 

Federal Deposit Insurance Corporation (FDIC) acting chair Travis Hill recently stated that the agency aims to encourage more bank charter applications to maintain a steady pipeline of new entrants. 

Crypto is specifically finding more favorable ground in the US. Hill acknowledged alleged efforts to debank this sector firms and called them “unacceptable.”

The FDIC will also revise its guidelines to allow banks to interact with crypto-related activities, suggesting an opening channel.

Federal Reserve Chairman Jerome Powell contributed to the improving regulatory landscape by saying that the central bank regulator has no intention of preventing banks from serving crypto to perfectly legal customers. 

The Trump’s administration policies are generally expected to favor business growth and facilitate charter approvals.

Nathan Stovall, director of financial institutions research at S&P Global Market Intelligence, pointed out that previous regulatory trends under Trump saw increased charter applications.

Competitive implications

The number of new bank charters approved in the US plummeted after the 2008 financial crisis, with just four approvals recorded in 2023, according to S&P Global. 

Between 2010 and 2023, regulators approved an average of only five new charters annually, compared to 144 per year from 2000 to 2007.

Applications have historically faced prolonged review periods, with some withdrawn due to regulatory challenges and interest rate conditions that reduced profitability. Online financial platforms recognize that increasing regulatory scrutiny necessitates a proactive approach.

Goss said that it makes sense for these platforms to get ahead of the curve, adding that securing a bank charter enhances credibility and reduces operational costs.

The post Crypto firms aiming for banking licenses under Trump administration appeared first on CryptoSlate.