In front of the House Subcommittee on Consumer Protection and Financial Institutions, the ABA said it strongly “supports and seeks to streamline de novo bank formation; supports and seeks to facilitate responsible bank innovation, including new technologies, partnerships and business models; and believes in charter choice.”
While the ABA said it supports new entrants (in the banking community) and new ways of reaching consumers, it said jurisdictions should not be able to create new charters or apply interpretations to traditional charters that are designed to pair bank-like benefits. This includes benefits such as federal preemption and access to critically shared infrastructure, such as the Federal Reserve payment system, with less regulation of consumer and systemic risks.
The ABA focused on cryptocurrency models and action at the Office of the Comptroller of the Currency (OCC) where applications for traditional charters are being considered and granted for non-traditional business models, which, the ABA said, presents risks to the payments system and allows entities to seek bank charters without being subject to the same oversight and regulations as traditional banks.
“The two recently granted OCC trust charters to firms offering digital custody services were made possible by OCC Interpretive Letter 1176 (IL 1176) issued during the last week of the former acting comptroller’s tenure and two days before the charter applications were provisionally approved,” the ABA said in the testimony.
“IL 1176, drafted without any public comment or input, lowered the standard for eligibility for the OCC trust charter by denoting that any entity that meets a lower state charter requirement now, by default, is eligible for an OCC charter,” the ABA continued.
The ABA urged Congress and the OCC to conduct a review of OCC activities related to IL 1176, and noted that the OCC and states should not grant charters to banks that take deposits but are designed to avoid BHCA oversight.
A bill was passed Wednesday (April 21) by congress that would create a digital asset working group designed to promote collaboration between regulators and the private sector to encourage innovation,.