ABA Requests Postponement of Cryptocurrency Charter Approvals
The American Bankers Association (ABA), representing the largest banking interests in the United States, has formally requested that the Office of the Comptroller of the Currency (OCC) postpone its approval of cryptocurrency charter applications. This appeal comes against the backdrop of ongoing legislative efforts to establish a regulatory framework for digital assets and stablecoins, with the ABA expressing concerns over potential risks to the financial landscape if new firms are allowed to operate without clear guidelines.
Concerns Over Regulatory Framework
In a letter addressed to the OCC sent on Wednesday, the ABA emphasized the need for stringent and universally applicable safety regulations to be fully defined and understood during this period of technological advancement.
As prominent cryptocurrency firms like Circle, Ripple, BitGo, Paxos, Coinbase, and Nomura’s Laser Digital seek approval or currently hold conditional charters from the OCC for operations related to their stablecoin offerings, the ABA cautioned that rushing into granting these charters could precipitate instability. Anthony Agoshkov, co-founder of Marvel Capital, highlighted the potential for these firms to gain direct Federal Reserve access, which could fundamentally alter the current financial system by reducing reliance on traditional intermediaries for transactions.
Regulatory Duties and Transparency
The ABA expressed its concerns over OCC’s recent strategy of tying charter approvals to compliance with the GENIUS Act, a regulation whose comprehensive implementation is still years away due to the need for completion from five separate regulatory agencies. They urged the OCC to take a measured approach to charter approvals, emphasizing that applicants’ regulatory duties should be fully transparent before progress can be made.
Addressing Financial Vulnerabilities
In light of high-profile failures like FTX and Celsius in 2022, which underscored the vulnerabilities associated with innovative financial models, the ABA has called on the OCC to ensure that it has adequate processes in place to manage potential insolvencies stemming from new or existing crypto charters. Furthermore, the ABA advocated for a prohibition on non-bank entities using the designation “bank” to accurately reflect the nature of their business and avoid misleading consumers about the services offered.
Broader Campaign for Cryptocurrency Regulation
This communication is part of a broader campaign by banking institutions to shape the evolving landscape of cryptocurrency regulation in the U.S. Last month, the ABA’s Community Bankers Council alerted lawmakers to what it perceives as violations of the GENIUS Act, claiming that certain crypto firms were circumventing the prohibition against stablecoin interest payments through affiliated platforms.
This ongoing pressure has significantly influenced the legislative process concerning crypto, particularly impacting negotiations over a market structure bill that would prevent crypto companies from offering interest on stablecoin holdings. The situation has become contentious, with Coinbase CEO Brian Armstrong withdrawing support for the evolving legislation, labeling it as detrimental compared to current regulatory conditions.
