US banks have come out against issuing Circle and Ripple banking licenses anytime soon

What’s new? US banking groups have urged supervisors to delay a decision on whether to issue licenses to crypto companies until more information about their plans is known. The letter states that approving the applications would be a “fundamental departure” from current policy.

Material by Cointelegraph

What else is known? The American Bankers Association (ABA) and other associations of banks and credit unions said in a letter to the Office of the Comptroller of the Currency (OCC) that issuing national bank licenses to Circle and Ripple stablecoin issuers “would raise significant policy and process concerns.”

“There are significant policy and legal questions as to whether the Applicants’ proposed business plans involve the types of fiduciary activities performed by national trust banks,” the groups argued.

For example, providing crypto custodial services is not a fiduciary activity, and issuing licenses to firms with no or secondary traditional fiduciary activities is a significant OCC policy change. It should be made only after public notice and a period of deliberation, the authors said.

Issuing licenses would allow crypto firms to become independent banks, make payments faster, and be regulated at the federal level, opening up the possibility of operating in every state.

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The banks have asked the OCC to delay a decision on the crypto firms’ applications because their open portions “do not provide sufficient information for the public to assess or provide meaningful comment on the Applicants’ proposed business models and operations.”

If crypto firms are allowed to become national banks with a suite of traditional banking services, including payments, other companies could follow suit, posing a “material risk to the US banking and financial system.”

Earlier this month, the OCC, the Federal Reserve (Fed), and the Federal Deposit Insurance Corporation (FDIC) published joint guidance for banks offering cryptocurrency custody services. It emphasizes that crypto custodial services do not create new supervisory requirements.

Regulators have instructed boards and management to treat cryptocurrency storage as a service based on exclusive control over private keys and other sensitive data.

Thus, the bank must prove that no other party, not even the customer, can unilaterally move the asset once it has gone into custody.