Block Seeks National Trust Charter to Offer Crypto Custody
Block, the fintech company led by Jack Dorsey, has submitted an application to the Office of the Comptroller of the Currency (OCC) to establish a national trust bank called Builders Bank and Trust. The charter would enable the company to offer custody services for both bitcoin and stablecoins, marking a significant development in the fintech industry's push for direct bank regulation.
Background and Context
Block's move to apply for a national trust charter is part of a broader trend in the fintech industry, where companies are increasingly seeking to own the bank regulation relationship directly rather than relying on sponsor banks. This shift is driven by the need for greater control and flexibility in managing digital assets, as well as the desire to reduce regulatory complexity.
Block has been working with digital assets for years, and its experience in the space has laid the groundwork for its application. The company has already self-custodied bitcoin in most cases, and the charter is likely to support better scale and growth at the federal regulatory level, rather than relying on a patchwork of state-level regulations.
What's at Stake
The application of Block for a national trust charter has significant implications for the fintech industry and the broader financial landscape. If approved, Builders Bank and Trust would provide custody and related fiduciary services for digital assets, including bitcoin and stablecoins. This would enable Block to expand its offerings and provide greater security and flexibility for its customers.
However, the application also raises questions about the potential risks and challenges associated with offering custody services for digital assets. As KBCM analysts noted, the charter adds optionality across stablecoin settlement and other digital asset activities, but it also raises the possibility of tokenized deposits, which are still a relatively new and untested use case.
Expert Insights
According to KBCM analysts, Block's application for a national trust charter is significant because it marks a shift towards direct bank regulation. The analysts noted that Block has not signaled tokenization plans and its stated digital asset focus remains bitcoin, with stablecoins adopted more reluctantly on customer demand.
Lee Woolley, who would serve as president and CEO of Builders Bank, emphasized the company's experience in the digital asset space and its commitment to supporting the secure custody of assets for Block and its customers. Woolley has a strong background in banking, having previously served as president and CEO of Treasury Department Federal Credit Union and held senior leadership roles at Northern Trust and BNY Mellon.
Next Steps
The application of Block for a national trust charter is subject to review and approval by the OCC. The agency has publicly advertised that it aims to turn around charter applications in 120 days, and the application has not yet been posted for public comment.
As the fintech industry continues to evolve and adapt to changing regulatory landscapes, Block's application for a national trust charter is a significant development that could have far-reaching implications for the industry as a whole. Whether the application is approved or not, it is clear that Block is committed to expanding its offerings and providing greater security and flexibility for its customers.
Key Takeaways
- Block has submitted an application to the OCC to establish a national trust bank called Builders Bank and Trust.
- The charter would enable the company to offer custody services for both bitcoin and stablecoins.
- Block's experience in the digital asset space has laid the groundwork for its application.
- The application is subject to review and approval by the OCC, which has publicly advertised that it aims to turn around charter applications in 120 days.