FinTechs and Crypto Firms Get Banking Ambitions

A friendlier regulatory environment has cryptocurrency companies and FinTechs trying to become banks.

As Reuters wrote in an analysis Tuesday (March 18), companies that had been hoping to expand see President Donald Trump as their chance to obtain licenses that regulators had either been slow or reluctant to issue.

“We have seen a lot more interest. We are working on several applications now,” Alexandra Steinberg Barrage, a partner at law firm Troutman Pepper Locke, told Reuters.

“Is it in full swing yet? I don’t think so. Our clients are being cautiously optimistic, they’re waiting for things to settle,” as Trump names new banking officials.

Sources who are working on potential license applications say preparations for bank charters have increased significantly, though it’s not clear how many companies will follow through.

The Reuters report notes that while companies that become banks will need to deal with more oversight, they might also see their capital and business costs go down. Licenses can also offer more legitimacy in the eyes of customers and yield business and market opportunities.

Companies can also reduce their borrowing costs by drawing on deposits, another major advantage, said Carleton Goss, partner at law firm Hunton Andrews Kurth who is working on three such applications.

This uptick in licensing attempts follows a plunge in the number of bank charters approved by U.S. regulators, with just four applications being approved in 2023, a record low, the report added, citing S&P Global data.

“Online companies know that they will be coming under greater regulatory scrutiny,” said Goss. “It makes sense for them to get ahead of the curve, and in turn, get more credibility and capital at a lower cost by applying for a charter.”

Between 2010 and 2023, an average of just five new bank charter applications were greenlit each year by regulators, compared with 144 a year between 2000 and 2007, Barrage and other regulatory lawyers wrote in a recent open letter on streamlining the approval process.

As PYMNTS wrote earlier this month, there has been a groundswell of support in Washington recently for de novo — or newly chartered bank — activity.

Travis Hill, acting chairman of the Federal Deposit Insurance Corp., said in January that the regulator would seek to “encourage more de novo activity so there is a healthy pipeline of new entrants in the banking sector.”