Several cryptocurrency firms are applying for state and national bank charters, aiming to expand their businesses under the administration of U.S. President Donald Trump.
Crypto firms, as well as financial technology (fintech) companies, are optimistic that they will receive bank charters from the digital friendly Trump administration. Becoming a U.S. bank brings stricter regulatory oversight, but it can reduce borrowing costs and enhance a company’s legitimacy, say analysts. Bank charters allow lenders to lower their cost of capital by accepting deposits.
In the past, cryptocurrency firms largely resisted becoming banks because of the enhanced regulatory oversight such a move would bring with it. Also, many crypto purists claim that digital assets were created to bypass the traditional financial system and banking model, and that decentralized finance remains the best way to improve access to financial services.
Making Hay
However, many crypto firms now appear to want to become banks, including Paxos, Anchorage, and Protego, each of which is seeking a bank charter. Other crypto firms, such as Kraken and Avanti, have secured “Special Purpose Depository Institution” charters, effectively making them state-regulated banks.
New bank charters in the U.S. have become increasingly rare. Between 2010 and 2023, regulators approved an average of only five new bank charters a year, according to data from S&P Global. Bank charter applications dwindled over the last decade due to increased regulations following the 2008-09 financial crisis. However, the Trump administration has signaled plans to streamline applications.
Bitcoin (BTC), the largest cryptocurrency by market capitalization, is currently trading at $84,300, having declined 13% this year.
Is BTC a Buy?
Most Wall Street firms don’t offer ratings or price targets on Bitcoin, so we’ll look at the cryptocurrency’s three-month performance instead. As one can see in the chart below, the price of BTC has declined 16% in the last 12 weeks.
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