The crypto space and the traditional banking space appear to be one and the same as of late. There have been several crypto-based companies that are seeking to either establish their own banks or establish themselves as banks, and Paxos Trust – the official crypto partner of digital payment system PayPal Holdings Ltd. – is the latest firm to travel this route.
Paxos Trust Is Trying To Become a Little More
The company has recently submitted paperwork with the Office of the Comptroller of the Currency (OCC) to potentially obtain a charter so that it can form a national bank. Paxos has been at the center of several financial developments in recent weeks, a main one being that it is now working with PayPal to assert crypto custody services for the platform’s clients.
In addition, the partnership with Paxos is allowing PayPal to offer its crypto products in New York. The new bank would also be established out of the Big Apple.
In a blog post, general counsel and chief compliance officer for Paxos Dan Burstein explained:
This week, Paxos submitted an application to the U.S. Office of the Comptroller of the Currency (OCC) for a national Trust Bank charter. If granted this national charter, Paxos will become the first custodian of digital assets to be regulated at both the state and federal levels. We’re excited about the benefits a national Trust Bank can bring to our business, operations and customer service. Our mission is to modernize financial market infrastructure and enable the movement of any asset, any time, in a trustworthy way. A national Trust Bank charter would help us realize our goal by enabling us to serve customers across the country in the most efficient way.
This is not the first time a crypto company has attempted to build its own bank. Recently, Bit Pay – a national crypto and bitcoin payment firm – sent its application to the OCC to establish a bank in its name that would allow users to engage in services with its platform the way they would with a traditional financial institution. Should the company have its way, the bank would be established in Georgia.
This is all a clear sign that the crypto space is becoming more regulated and mainstream. However, there is a catch in that should a crypto bank be established, it would likely be regulated in a way similar with a traditional bank, meaning the firm would be centralized. This goes against the decentralized nature of most cryptocurrencies, which are built in such a way that they give more financial independence to users.
Banks, by contrast, have more say in who gains access to their services and products.
Regulation Is Getting More Serious
Burstein continues his post by saying:
A national Trust Bank charter provides us with [the] flexibility to operate across the U.S. while continuing to adhere to the highest regulatory standards.