In a strategic move aimed at expanding its operational capabilities, cryptocurrency exchange Coinbase has formally applied for a National Trust Company Charter with the Office of the Comptroller of the Currency (OCC). This initiative places Coinbase among a growing list of U.S.-based cryptocurrency firms vying for the same regulatory license.
In a statement released on Friday, Coinbase articulated that this endeavor signifies a pivotal step towards enhancing its business functions and regulatory oversight, beyond the current operational guidelines. The exchange expressed, “Coinbase is taking a significant step in expanding our business capabilities and regulatory oversight beyond the existing framework, paving the way for innovation and growth in building a modern financial system powered by digital assets.”
Coinbase envisions this charter as a means to integrate more seamlessly with traditional finance, bridging the divide that currently exists between the cryptocurrency landscape and traditional banking systems. Notably, the company has clarified that it does not plan to transform into a traditional bank. “Coinbase has no intention of becoming a bank. It is our firm belief that clear rules and the trust of our regulators and customers enable Coinbase to confidently innovate while ensuring proper oversight and security,” the platform explained.
Luke Youngblood, a former employee at Coinbase who previously spearheaded the development of the platform’s staking rewards, noted in a recent podcast that obtaining this charter could significantly streamline operations for Coinbase. According to Youngblood, the charter would allow the exchange to establish a built-in on-ramp and off-ramp for digital assets, reducing the need to partner with external banks for such services.
The implications of the National Trust Company Charter extend beyond improved custodial services, as Coinbase aims to broaden its service offerings to include payments and additional financial products. The exchange anticipates that with clearer regulatory guidance, it can create a more robust portfolio of services that cater to evolving customer needs.
However, some experts have pointed out potential limitations associated with the National Trust Company structure. Political commentator Brendan Pedersen highlighted that trusts may inherently face more restrictions compared to standard banking operations. Yet, he noted that the lines between these business models have increasingly blurred over time, suggesting that the operational landscape is in flux.
Youngblood also reflected on the advancements made in Coinbase’s retail application since his departure in 2022, noting substantial improvements in features and user experience. He remarked, “When I worked there back in 2022, before I left, it was not that great. The features, like the Coinbase debit card, didn’t work very well. You can really tell they’ve hired some top engineering talent.”
This significant licensing move by Coinbase follows similar actions taken by other cryptocurrency companies. Notably, stablecoin issuer Circle submitted an application to establish a national trust bank in the U.S. on July 1, and shortly after, Ripple Labs made a comparable appeal for the same license. Ripple’s CEO, Brad Garlinghouse, emphasized that if approved, the license would set a “new (and unique!) benchmark for trust in the stablecoin market.”
As the cryptocurrency sector continues to mature, the pursuit of regulatory clarity through initiatives like the National Trust Company Charter may prove essential in fostering trust and facilitating a cohesive relationship between the crypto economy and traditional financial systems.
