Fintechs and Crypto Firms Pursue Bank Charters Amid Deregulatory Push

Financial technology (fintech) and cryptocurrency firms are actively seeking state or national bank charters, seeing an opportunity to expand under what they perceive as a more industry-friendly Trump administration, reports Reuters. Several industry executives confirm a surge in applications as firms aim to gain regulatory credibility and access to lower-cost capital.

According to Alexandra Steinberg Barrage, a partner at law firm Troutman Pepper Locke, the interest in bank charters has noticeably increased, though firms remain cautiously optimistic as key regulatory appointments are finalized. Other legal experts echo this sentiment, reporting a rise in discussions and preparations for bank applications.

A bank charter allows companies to lower borrowing costs by accepting deposits, expand market reach, and enhance customer trust. While regulatory scrutiny intensifies for chartered banks, firms see long-term benefits in stability and capital efficiency. Carleton Goss, a partner at Hunton Andrews Kurth, notes that despite the challenges, fintechs are increasingly recognizing the competitive edge a bank license can provide.

The Office of the Comptroller of the Currency recently granted SmartBiz approval to acquire Centrust Bank, marking the first fintech bank charter approval since 2021. Analysts predict more firms will follow suit, especially as the administration signals support for financial innovation.

Regulatory Shift and Market Impact

Following the 2008 financial crisis, new bank charters became rare, with annual approvals plummeting from an average of 144 between 2000 and 2007 to just five per year from 2010 to 2023. The pace remained sluggish, with only four approvals in 2023. Regulatory hurdles and low interest rates had discouraged new entrants, but the current administration’s deregulatory stance is shifting the landscape.

Experts believe the Trump administration’s policies could streamline the bank charter process. Federal Reserve Governor Michelle Bowman has emphasized the need for faster approvals, and FDIC acting chair Travis Hill has encouraged more firms to apply. However, industry leaders caution that the licensing process remains rigorous, with capital requirements between $20 million and $50 million.

Despite regulatory challenges, the U.S. banking sector is set for transformation. With over 4,500 banks currently operating and consolidation among regional lenders expected, new entrants could introduce competition and innovation in financial services.