The connection between digital banking and cryptocurrency is becoming increasingly close, with fintech companies increasingly seeking to leverage the rapidly growing crypto assets to attract U.S. customers.
Written by: Nikou Asgari, Akila Quinio, Joshua Franklin
Translated by: Block unicorn
Headquartered in New York, Circle stated that obtaining a national bank trust license would be an "important step" for the integration of digital assets into the broader financial system; Image source: Michael Nagle/Bloomberg
Cryptocurrency companies are racing to enter the U.S. traditional banking sector, hoping to take advantage of a more favorable regulatory environment under President Donald Trump to further integrate into the financial system.
Cryptocurrency payment group Ripple, stablecoin company Circle, and custody firm BitGo have applied for national trust bank licenses, which will allow them to offer some banking services, while cryptocurrency exchange Kraken plans to launch a debit card next month.
Kraken's co-CEO Arjun Sethi told the Financial Times, "This is a natural convergence," adding that the company plans to launch debit and credit cards by the end of this month.
These initiatives highlight how cryptocurrency companies are seeking to expand their business scope beyond just providing digital asset services. With the Trump administration's open attitude towards digital assets, industry executives have gained increased confidence, in contrast to his predecessor Joe Biden, who is perceived as hostile to the industry.
Co-CEO of cryptocurrency exchange Kraken, Arjun Sethi, plans to launch debit and credit cards by the end of the month; Image source: Ramsey Cardy/Sportsfile/Getty Images
Circle, headquartered in New York, stated that obtaining a national bank trust license from the Office of the Comptroller of the Currency (OCC), which oversees financial institutions, would be an "important step" for the integration of digital assets into the broader financial system. Anchorage Digital is the only cryptocurrency company with a national bank license.
"This is completely contrary to the initial philosophy of many cryptocurrency companies, which said 'we don't need banks, we don't need laws, we are above everything,'" said Max Bonici, a partner at Davis Wright Tremaine law firm. "Now they are saying 'please regulate us.'"
While national trust banks can custody assets and process payments, they cannot provide loans or directly accept customer deposits. Obtaining national trust status would exempt companies from the need to obtain licenses from individual states and improve their access to the financial system.
As cryptocurrency companies accelerate their entry into banking ahead of discussions on stablecoin legislation in Washington, this legislation would bring stablecoins (which supporters believe can function like currency) closer to the traditional financial system.
Pillsbury partner Adam Chernichaw stated, "This really opens up the U.S. financial market, essentially allowing for the emergence of stablecoins."
Stablecoins track the price of national currencies like the U.S. dollar and are increasingly becoming mainstream, receiving strong support from Trump and his cabinet. Traders use them to trade between sovereign currencies and cryptocurrencies, while others use them for cross-border payments.
The proposed "Genius Act" would strengthen regulation of stablecoins and tie them more closely to U.S. Treasury securities, which are used to back stablecoins pegged to the dollar. Only regulated banks and some non-bank groups licensed by the OCC would be able to issue stablecoins.
Ripple CEO Brad Garlinghouse stated that the company has also applied for a master account with the Federal Reserve, which would allow it to hold stablecoin reserves directly at the central bank.
The connection between digital banking and cryptocurrency is becoming increasingly close, with fintech companies increasingly seeking to leverage the rapidly growing crypto assets to attract U.S. customers.
Robinhood CEO Vlad Tenev stated that the company plans to launch banking services in the fall; Image source: Chris Ratcliffe/Bloomberg
Retail brokerage firm Robinhood generated more than half of its trading revenue from cryptocurrency last year and plans to launch some banking services in the fall.
"We should be able to meet all your financial needs," CEO Vlad Tenev told the Financial Times. "This way, you don't have to worry about taxes, estate planning, and fund transfers."
A significant portion of revenue for London-based neobank Revolut also comes from cryptocurrency trading, and the company has long-term goals of obtaining a U.S. banking license, while Klarna CEO Sebastian Siemiatkowski plans to add cryptocurrency to the offerings of this consumer loan company.
Meanwhile, large banks, including Bank of America, are seeking to issue their own stablecoins after U.S. regulations are finalized.
"This administration has indicated that they will open charter applications in ways that previous administrations did not," said David Portilla, a partner in the financial services department at Davis Polk.
However, not all cryptocurrency companies diversifying into traditional consumer banking believe they need to apply for a banking license. Cryptocurrency exchange Kraken, which is licensed in Wyoming, is launching its new app without applying for a license or master trust.
"We don't want to be a bank that offers mortgages. We just want to partner with those who can provide the best services," Sethi said.
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