This week, both Paxos and BitPay applied to become national banks. On December 8th, both digital currency service providers filed their paperwork with the Office of the Comptroller of the Currency. According to the filings, Paxos is looking to operate out of New York and BitPay is looking to operate out of Georgia.
Earlier this year, we saw the digital currency exchange Kraken become the very first digital currency bank. Subsequently, we saw Caitlin Long’s Avanti become the second digital currency bank.
Why are digital currency service providers looking to become banks?
“We’re excited about the benefits a national Trust Bank charter can bring to our business, operations and customer service,” said Paxos in its official announcement. “US law is organized at both a state and federal level. The national charter was designed expressly to allow banks to conduct business across state lines more easily.”
If digital currency service providers were to become national banks, they would no longer need to apply for licenses or permission to operate on a state by state basis. In addition, if digital currency service providers become national banks, the laws that they must abide by become uniform throughout the country, rather than unique in each state like they are at the moment.
“Our operations as a national trust bank will be subject to strict safety and soundness requirements, which will provide our customers with assurances that our services remain best in class and allow us to be subject to a uniform regulatory framework,” said BitPay
And they’re not alone…
Earlier this year, the digital currency custody-provider Anchorage also applied to become a national bank. Given the benefits that digital currency service providers would experience by becoming a national bank, we will most likely see more service providers follow in the footsteps of Kraken and Avanti. Digital currency service providers becoming banks also paves the way for the digital currency banks to offer digital-asset related financial products.
From paying bills and receiving salaries in cryptocurrency to incorporating digital assets into investment and trading portfolios, Kraken Financial will enable Kraken clients in the U.S. to bank seamlessly between digital assets and national currencies,
said Kraken in its official announcement, which shows that they will be one of the first to integrate digital asset products into the world of legacy banking and finance.