Federal agencies, states compete to be fintech regulator

A federal banking regulator’s grant of the first national trust bank charter to a cryptocurrency startup may touch off a turf war over which agency is best suited to oversee the burgeoning financial technology market.

The Office of the Comptroller of the Currency, a unit of the Treasury Department, on Jan. 13 approved South Dakota-based Anchorage Digital Bank NA to hold cryptocurrencies for customers, making it the first federally regulated bank for digital assets such as Bitcoin.

The approval came just days after a Consumer Financial Protection Bureau task force released a 900page report that recommended Congress authorize the CFPB to issue national licenses to certain fintech firms.

Sanford M. Brown, a former OCC attorney who is now a partner with Alston & Bird’s financial services practice group in Dallas, said the task force’s suggestions came “out of the blue,” given that OCC has previously laid the groundwork for fintech licensing. OCC, which oversees the majority of U.S. banks, has issued other types of fintech licenses and launched efforts to promote domestic fintech advances.

Brown and others say the OCC’s action and the CFPB’s ambitions put those agencies at odds with each other and with state financial regulators, who say they have primary jurisdiction over fintech firms within their borders.

The OCC’s approval means that Anchorage Digital won’t need authorization from financial regulators in each individual state. Prior to the approval, the company was licensed in South Dakota to hold client cash deposits and cryptocurrency. Its customers are primarily institutional investors that transact in digital assets, including Bitcoin, Bitcoin Cash, Ethereum, Zcash and Filecoin.

Just who wins the fight for authority of licensing oversight could be decided by Congress. The CFPB task force said lawmakers should shed more light on the OCC’s authority to grant charters to nonbank fintechs.

“If Congress elects not to authorize the Bureau to issue federal licenses, it should clarify that the OCC has that authority,” the CFPB-appointed panel said. “This alternative option would ensure that fintechs operating nationwide companies are subject to a single set of laws.”