OpenReserve Receives Preliminary Approval for National Bank
On September 2, the Office of the Comptroller of the Currency (OCC) granted preliminary conditional approval to OpenReserve for the establishment of a national bank in Salt Lake City, Utah. This initial approval, however, does not permit the bank to start operations immediately; OpenReserve must fulfill several key requirements related to capital, governance, compliance, and security before the OCC will grant final authorization.
OpenReserve’s Vision and Services
OpenReserve’s journey began on April 13 when it submitted its application for a national bank charter. Unlike other institutions that may focus solely on limited purposes, OpenReserve plans to offer a wide range of services that include accepting insured deposits and providing traditional lending in addition to digital asset management.
The bank envisions a variety of offerings such as deposit products, commercial and consumer lending services, treasury management, payments solutions, and foreign correspondent banking. Its proposed deposit products are likely to incorporate tokenized elements, as mentioned in the OCC’s detailed decision.
Innovative Digital Asset Custody
In an innovative move, OpenReserve also aims to provide digital asset custody via a subsidiary, allowing customers to utilize digital currencies, including stablecoins, for international money transfers and other payment options permitted by regulations. This capability could position OpenReserve to collect transaction fees in cryptocurrencies, although it would typically need to convert these into fiat currency swiftly, often within a single business day, unless they are needed for specific purposes like covering blockchain transaction fees.
Dee Choubey, the CEO of OpenReserve, highlighted the initiative by stating, “OpenReserve Bank is our contribution to that tradition: durable financial infrastructure, built in the United States.”
Nonetheless, the range of services will be contingent upon receiving final approval, as well as determining product designs and customer eligibility criteria.
Capital Requirements and Regulatory Compliance
The OCC has stipulated that OpenReserve must generate a minimum of $210 million in paid-in capital to cover organizational and startup costs, maintaining a tier-one leverage ratio of no less than 12% for the initial three years in operation. The company is required to meet this capital target within a year, with banking operations having to commence within 18 months of receiving the conditional approval. Should they fail to meet these timelines without extenuating circumstances, the approval could lapse.
In pursuing its goals, OpenReserve also needs to apply for Federal Reserve stock and secure deposit insurance from the Federal Deposit Insurance Corporation (FDIC), having submitted the charter application alongside this insurance request. Notification of at least 60 days to the OCC is necessary before announcing a bank opening date, after which a thorough preopening examination will take place.
Future Plans and Support
Future plans include launching a subsidiary to manage U.S. dollar-backed stablecoins, yet an application for this arm has not yet been filed. Moreover, any stablecoin related activities will be subject to compliance with the GENIUS Act and associated regulations.
OpenReserve will establish operational programs spanning the Bank Secrecy Act, sanctions compliance, credit risk assessment, and information security measures. An independent auditor will be appointed, and comprehensive financial statements will need to be prepared adhering to generally accepted accounting standards. A thorough assessment of the bank’s digital platform must also take place to ensure protection against various risks, like unauthorized access and denial-of-service attacks, all requiring OCC approval for the final technology framework and risk management strategies.
Support for OpenReserve includes seed funding from well-known investors like Andreessen Horowitz, Coinbase Ventures, and Wintermute Ventures, although the total amount raised or the portion contributing towards the $210 million capital requirement has not been disclosed.
Conclusion
The OCC’s recent approval is part of a broader trend of digital asset businesses actively seeking federal oversight. Recently, 13 additional digital asset applications were reported to be pending as the OCC encourages compliant cryptocurrency operations to obtain national charters. OpenReserve’s proposal for traditional banking services sets it apart from other firms such as Crypto.com, which has aimed for a limited-purpose trust bank focusing on custody services rather than insured deposits.
It’s essential to highlight that the OCC retains the authority to modify or retract OpenReserve’s approval prior to its operational launch, and final approval hinges on the company’s ability to satisfy all regulatory conditions within set timelines.
