Partisan battle looms for granting crypto, other companies to new Fintech banking charters
Congressional Democrats on Thursday expressed skepticism about a new type of banking charter that would grant certain privileges to fintech and cryptocurrency companies enjoyed by domestic banks, without subjecting them to the same degree of regulatory oversight. .
âState regulators, community banks and credit unions have sounded the alarm bells about how new entities, including large tech companies, are receiving unconventional banking charters and delivering banking products and services while bypassing regulations that most banks, including community banks, must comply with, âsaid the representative. Maxine Waters of California, chair of the House financial services committee, during a subcommittee hearing on the subject Thursday morning.
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“The [Office of the Comptroller of the Currency] overstepped his authority, claiming that the laws signed by Abraham Lincoln were intended to create charters for fintech or cryptocurrency, âadded Waters, a Democrat.
Under the Trump administration, the OCC – the regulatory agency within the Treasury Department responsible for granting the national bank
charters – developed a new fintech banking charter that would allow fintech companies to offer loan and payment products, without accepting deposits or FDIC insurance or being overseen by state banking regulators. The agency was established during the Lincoln administration, when the national banking system was established.
The policy was energetically administered by Brian Brooks, who served as Acting Comptroller of the Currency for much of the past year, and previously served as Coinbase’s General Counsel.
PIECE OF MONEY
the cryptocurrency exchange firm that debuted on the public markets on Wednesday with a market cap of over $ 65 billion. Brooks told the committee that these charters were needed amid extensive consolidation in the banking industry that saw the number of U.S. banks grow from 8,315 in 2000 to 4,519 in 2019.
“The rise of non-bank financial service providers, and in particular fintechs, is a result of market forces which include the dramatic reduction in bank branches … most in low and moderate income rural and urban communities,” Brooks told the committee, adding that he believes that “innovative technology has emerged that allows fintech companies to provide consumers with better alternatives to traditional banks on the one hand and to shopping center financiers, like payday lenders, to somewhere else”.
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Brooks went on to say that denying financial technology and crypto companies banking charters would actually lead to poorer regulation of those companies and activity once overseen by state and federal regulators to “continue out of their sight. “.
Republican Patrick McHenry of North Carolina, the senior Republican on the financial services panel, agreed that Brooks’ approach to the OCC was the right one.
âThe preferences of consumers and businesses have evolved and continue to evolve. The private sector innovates to meet the wants and needs of all consumers, âhe said. “We should encourage our regulators to seek regulatory requirements that match this progress, not hinder it.”
Several Democrats on the committee took the opportunity to express their deep skepticism about cryptocurrencies in general. Representative Brad Sherman of California challenged the OCC’s January decision to grant San Francisco-based Anchorage Digital Bank conditional authorization to become the first federally chartered crypto bank, which seeks to provide banking services. guard against institutions that invest in crypto assets.
“I looked at bitcoin and wondered if there was a big enough market among terrorists, drug dealers and that didn’t seem like enough, then I realized … there was 1 trillion dollars a year in unreported taxes, mostly for the wealthy, âSherman said. âBitcoin isn’t just for narco-terrorists anymore, it’s also for tax evaders. It’s the bitcoin market, âhe accused, suggesting that there was no real market for crypto custodians, except as a facilitator of illegal activity.
Representative Al Green from Texas, meanwhile, argued that the skyrocketing price of cryptocurrencies like bitcoin
led his constituents to have “dismay over digital currency, cryptocurrency, because they fear it will become a Ponzi scheme,” given its widespread lack of use for making real everyday purchases, a said the Democrat.
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Brooks has strongly opposed these characterizations of cryptocurrencies and the blockchain technology behind them. âWe’re building a second Internet here,â he said, adding that the purpose of most crypto tokens is to reward people for lending their computing power to a decentralized network to power online applications.
“It is not designed for terrorist financing, it is designed to allow us to have a truly decentralized Internet,” he added. “If you think American soft power in the world has a lot to do with our controlling ICANN and the Internet Protocol, I think you will feel the same about these new protocols,” he said. he declares. ICANN is the organization that manages the Internet domain name system.