In a decision that has big implications for banks’ ability to use stablecoins as payment tools, the Office of the Comptroller of the Currency (OCC) announced in a Tuesday, January 18 press release that FinTech lender SoFi will be authorized to purchase a National Bank insured by the Federal Deposit Insurance Corporation (FDIC) as long as it ceases to offer cryptocurrency trading services.
SoFi, which stands for Social Finance, is a lender focused on personal and student loans, but it also offers several investment offerings, including a crypto trading service that offers 30 cryptocurrencies.
The OCC said on Tuesday it had approved SoFi’s purchase of California-based Golden Pacific Bank, National Association, to create SoFi Bank, NA. according to the statement.
Reading between the lines, the banking regulator’s decision strongly suggests that its November announcement ordering banks to ensure they have adequate controls in place and obtain prior approval – technically ‘no objection’ – from the banking regulator before engaging with cryptocurrencies will be very difficult to find.
First skepticism towards the stablecoin
This lines up with Acting Comptroller of the Currency Michael Hsu’s Nov. 23 ruling, which essentially clawed back his predecessor’s rulings that banks can hold cryptocurrencies for customers, can hold dollar reserves for issuers. stablecoins and can use stablecoins to make payments.
Read more: Comptroller of the Currency Reverses Rulings Allowing Banks to Handle Crypto
These rulings were made by Acting Comptroller of the Currency Brian Brooks – former general counsel for Coinbase and now CEO of crypto-mining computer maker Bitfury – and were seen as extremely important for industry integration. of cryptocurrency in banking. Calling them a “big win” for the industry, Jeremy Allaire, CEO of USDC stablecoin issuer Circle, said at the time that Brooks’ decisions paved the way for the use of stablecoins. “as a common means of payment for all forms of payment and settlement”. .”
In May, one of Hsu’s first acts at the OCC was to suspend those decisions for review. On the surface, this review ended well for crypto, with Hsu’s agency simply saying that “banks must be able to demonstrate that they have appropriate risk management systems and controls in place for drive safely, [providing] ensuring that crypto-asset activities that take place within the federal regulatory perimeter are conducted responsibly.
And in fact, that’s precisely what the text of the merger approval letter says, requiring SoFi Bank to obtain “a prior written determination of no supervisory objection from the OCC” before proceeding. ‘engage “in any crypto-asset activity or service currently performed by SoFi Inc.”
See also: OCC urges ‘caution’ for financial institutions offering crypto-related financial services
But that’s not what Hsu said in the accompanying press release, which contains no caveats about pre-approval or permission to offer crypto services, whether related trading crypto or using stablecoins for back-end transaction settlement.
By bringing the big fintech “inside the federal bank’s regulatory perimeter,” Hsu said in the statement, the OCC’s action “levels the playing field and will ensure that the deposit and lending activities of SoFi are conducted in a safe and sound manner, including limiting the bank’s ability to engage in crypto-asset business.
It certainly sounds like Hsu saying that crypto-asset activities are dangerous and unhealthy.
He added: “This action is consistent with the comprehensive legal and policy review of pending licensing decisions that I initiated last May.”
read the tea leaves
At the same time, it is not fair to say that Hsu is flat against stablecoins – or crypto.
Read more: Stablecoins can spur innovation if regulated like banks
In a stablecoin-focused talk on Jan. 13 on “The Future of Crypto-Assets and Regulation,” Hsu called the fast-integrating crypto market “exciting” and added that “banking regulation would give from credibility to the “stable” part of stablecoins. ”
See also: Treasury official urges Congress to create uniform encryption framework
He also advocated “regulating stablecoin issuers as banks” to “enable more innovation in crypto and make those innovations more sustainable.”
But the OCC’s SoFi ruling suggests that finding that middle ground before Congress puts in place comprehensive crypto regulations will be a steep climb.
Read also: Six crypto executives warn Congress not to overregulate crypto