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OCC Comptroller Announces Availability of “Payment Charter” and “National Trust Charter” for Crypto Banks
In an interview with Forbes this week, Brian Brooks, Comptroller of the Currency, made two announcements on behalf of the US Office of the Comptroller of the Currency (OCC):
- It was previously discussed that the new Payments Charter would be issued sometime between September and December 2020. Charters issued by the OCC would allow payment companies or cryptoasset exchanges to operate across state lines in the US under one set of federally issued rules and a single corresponding governance framework – Charter of payment. So what’s actually new or changing about the federal Payments Charter? In a word, accessibility. The OCC is now ready to accept and process applications from companies involved in the payment industry for a national bank non-depository charter. Although he hasn’t received any applications yet.
- Many cryptoasset businesses in the US currently operate under government trust company charters. Essentially, a standalone crypto trust company instead of owning a money transfer license. Cryptocurrency businesses have applied to the OCC to convert their state trust company charters to national trust banks. Payment companies are also following this path. The bottom line is that in the US, crypto companies now have a clear and affordable path to becoming crypto banks.
Comptroller Brooks also noted that implementing the National Bank Charter for companies such as Stripe, PayPal and Square could be a good strategy for growth and development in this space.
Related, i in the news this week is Anchorage, South Dakota-based digital asset custodian, which applied to the OCC to convert to a national bank. If the OCC approves its application, Anchorage will be the first crypto-asset company to receive a national bank charter and will be open for business in all US states! U previous edition of this newsletter, we discussed the overall lowering of regulatory barriers for crypto businesses that allowed Kraken to obtain a banking license from the state of Wyoming. The first of its kind.
In the same interview, Comptroller Brooks commented on the dynamic interplay between state and federal roles. He provided instructive analogies to show cases where “The OCC was willing to cut through all the noise in the state and litigate with the states to ensure that in America we will have a competitive economic climate where you can operate your business on a national basis regardless of parochial state interests.” Ace states are also innovating are working double time to attract crypto-asset companies to their jurisdictions, federal and state regulators must keep the lines of communication open to ensure they don’t trip over each other and burden the growing industry or drive it overseas to perceived friendly regulatory environments.
Stay tuned and get involved, many strategic changes are on the horizon!
US bank regulator proposes rule to ease risk pressures on banking – without directly mentioning crypto-asset business
This week and OCC issued statement focusing on the need for banks to provide fairer and more equitable access to banking services provided by national banks, federal savings associations, and federal branches and agencies of foreign banking organizations: “banks should provide access to services, capital and credit based on risk assessment of individual clients, not on broad-based decisions affecting entire categories or classes of clients”.
Although the crypto-asset industry is not directly mentioned in the announcement, the issue of the availability of banking services is raised by the Financial Action Task Force and many the rest global bodies and national regulators before. Opening and maintaining a bank account is a constant pain point for crypto-asset businesses, money businesses, and others that may be judged or considered too risky for banking. Instead of de-risking and abandoning banking relationships with cryptoassets, banks have the opportunity to innovate and strengthen risk assessment models and risk assessment frameworks.
Elliptic explores this in more depth here. The Director of FinCEN, too warned banks on their obligations to manage cryptoasset risk exposure and reiterated this during his guest appearance on the Elliptic Regulator Coffee Series. Banks are now receiving the same messages from multiple regulators: cryptoasset risk management is not the same as closing bank accounts!
At Elliptic, we continue to work with leading crypto-asset businesses and financial institutions in the US, enabling them to deliver their services safely and with confidence. Contact us to learn more about how our blockchain analytics solutions can help your US crypto business with its risk management requirements, including conducting a thorough crypto asset business risk assessment.
Beginning of a new era of digital finance in Pakistan: SECP issues position paper on regulation of cryptoassets
The The Securities and Exchange Commission of Pakistan (SECP) has published paper discussing his views on the regulation of crypto-asset businesses in the country. The paper discusses the definitions and mechanics of the ecosystem and sets out a standardized baseline and taxonomy to be used when discussing “Digital Finance” in Pakistan. Relying heavily on business The Financial Action Task Force (FATF), SECP is clearly aligned with accepted global definitions, regulatory guidance and best practices issued by the global regulator of regulatory standards.
The position paper illustrates examples of regulatory regimes from other countries including Malaysia, Hong Kong and the US. The paper also mentions Australia, Singapore, Canada, Japan and Thailand as other countries where regulatory frameworks have already been implemented. The SECP reflects its need to define a policy and regulatory response to digital assets (p. 5):
- Digital assets are a form of innovation that can impact a country’s financial sector;
- Digital assets do not fit into the current regulatory framework;
- Digital assets can create the conditions for regulatory arbitrage while posing risk; and
- Increasing interest, investment and participation in digital assets.
The SECP intends to hold multiple discussion sessions regarding the development and implementation of its cryptoasset regulatory framework and welcomes comments and contributions to the following email address: Feedback@secp.gov.pk.
At Elliptic, we are particularly pleased about a few things: The Central Bank of Pakistan has not issued any prohibition statements. The country is determined to curb regulatory arbitrage by following the points outlined in the FATF action plan to mitigate the risks of money laundering and terrorist financing. The SECP also emphasizes that digital assets are “the beginning of a new era of digital finance”. Undoubtedly, there is much work to be done in Pakistan, including major interagency discussions, public-private consultation and coordination, as well as legislative engagement.
Similar to other jurisdictions, Pakistan also has a lot of work to do to unravel the strong resistance and reputational bias of cryptoassets. However, a positive position paper circulation is a great start.
South Africa’s FSCA intends to declare cryptoassets “financial products”
The Financial Sector Conduct Authority of South Africa (FSCA), the country’s main financial regulator, issued draft declaration on cryptoassets this week. In a statement, the FSCA notes that South Africa intends to treat the crypto-asset as a financial product under its Financial Advisory and Intermediary Services Act. “Globally, the interest of retail investors in buying crypto assets is growing. South Africa has also seen an exponential increase in the provision and use of crypto assets.” The draft statement is aligned with some of the recommendations presented and the Position Paper was previously published by the Crypto Asset Regulatory Working Group (CAR WG), an interagency working group.
“The Draft Declaration does not in any way affect the status of crypto assets in the context of other laws such as currency control regulations, requirements under the Pension Funds Act and the Collective Investment Schemes Act and so on, nor does it attempt to regulate, legitimize or give credibility to crypto property.”
The draft declaration is meant to be an interim step in mitigating the immediate risks associated with the crypto-asset. This creates space for regulatory authorities in South Africa to collaborate on a broader work stream arising from the comprehensive interagency efforts of the CAR WG. Future policy interventions and legislation are likely to be based on the framework of the CAR WG. FSCA invites comments and feedback on the draft declaration until 28 January 2021 via: FSCA.RFDStandards@fsca.co.zau.
November 27: Last opportunity to submit comments to FinCEN on the proposed ANPRM ‘Travel Rule’
On October 28, we noticed FinCEN’s common call with Board of Governors of the Federal Reserve System for industry feedback on the new proposed rulemaking (NPRM). The proposed amendment would lower the financial institutional threshold from $3,000 to $250 for transfers of funds and transfers of funds that begin or end outside the United States.
Using the power of a collaborative industry response, Elliptic submitted a response to this call for consultation alongside other industry members through the Digital Chamber of Commerce. Voice your views and share feedback with FinCEN this week!
Missed last week’s update? catch up here: Crypto Regulatory Affairs: FinCEN Focuses on Ransomware
