OCC Expands Discussion On FinTech Charters to Cryptocurrencies
In recent months, Acting Comptroller of the Currency Keith Noreika has traveled the country discussing the prospects of special purpose bank charters for financial technology (FinTech) institutions. Noreika is standing in as head of the Office of the Comptroller of the Currency (OCC) while President Trump’s nominee for the position, Joseph Otting, awaits Senate confirmation.
Shortly before Noreika’s predecessor, Thomas Curry, left the OCC in April, the bank regulatory agency issued a draft licensing manual for FinTech charters, essentially establishing a roadmap for non-bank financial technology companies to come under the regulatory auspices of the federal government. A national charter system would help FinTech companies escape a patchwork of state regulation in financial services, consolidating FinTech under federal regulation. Although the OCC is not yet reviewing charter proposals, the State of New York and the Conference of State Bank Supervisors filed separate lawsuits to block the charter proposal’s implementation.
Noreika’s service as Acting Comptroller is only until a permanent head can be confirmed, but that has not stopped the former attorney and law professor from frequently discussing the potential of the charter system to industry participants. At a FinTech conference last week sponsored by the Federal Reserve Bank of Philadelphia, he even opened up the possibility of cryptocurrencies organizing under the OCC’s regulatory umbrella.
Cryptocurrencies are digital forms of money that rely upon the encryption capabilities of modern computing to keep the currency safe and often anonymous. These digital currencies operate outside traditional banking systems and function free of government manipulation. Bitcoin was the first cryptocurrency and also the most widespread today. Similar to precious metals, Bitcoin must be “mined” through solving complex math problems. The digital currency’s creator has also capped total bitcoin output at 21 million. The price of bitcoin has exploded over the past year from a few hundred dollars per unit to thousands each.
As more businesses begin to accept bitcoin and other digital currencies, federal regulators will likely begin to take a closer look at cryptocurrency regulation. After $460 million was lost when the largest bitcoin exchange was hacked, many Asian countries have stepped in to oversee cryptocurrency markets. The U.S. Securities and Exchange Commission is still struggling to classify digital currencies and determine the proper regulatory environment moving forward.
With more than $100 billion in valuation and limitless applications, cryptocurrencies could become a major player in financial services. Some companies are even using bitcoin for online loans.
For regulators seeking information on the future of digital currencies, the cryptocurrency market is either minutes from total crash, a dangerous form of gambling, or poised to be a trillion dollar market in the next ten years. If the OCC’s charter system survives multiple legal challenges and leadership transitions, cryptocurrencies may find a mainstream home with federal FinTech regulators.
