Anchorage Granted US’s First National Crypto Bank Charter: A Clear Path for UnFederalReserve
SAN FRANCISCO — January 26, 2021 — The Office of the Comptroller of the Currency’s (OCC’s) recent announcement converting Anchorage Bank from a non-depository public trust to a national trust bank allowing custody and transfer of cryptocurrencies is good news for UnFederalReserve. The charter’s creation and Anchorage’s approval clarifies how at least one part of the U.S. government regards banking innovation, and the future is bright. U.S. entities wishing to perform banking activities, have a clear path which should last through the current presidential administration.
There is now an established protocol for the introduction of blockchain-based banking products into every area of banking. “Blockchain technology, digital asset custody and crypto transfer transactions are now a possibility around the edges of banking, and could even supplant payment, custody and other capital markets functions,” said Howard Krieger, co-founder and CEO of UnFederalReserve.
The specific charter issued to Anchorage is a trust charter, and therefore does not allow for the backing of the Federal Deposit Insurance Company (FDIC) in the way traditional savings and checking accounts do. However, Anchorage has a comprehensive policy in place with insurance company Aon plc to serve as a backstop. Many banking programs use bespoke insurance products to de-risk its programs. For example, the design of UnFederalReserve’s “credit vs. cash” spot market calls for an insurer to cover borrower default in certain instances.
The OCC pronouncement does a lot for elevating trust in the technology application. As Adam Jiwan, CEO of Springlabs recently stated, “We have always needed this trust in our financial systems, which spawned entities like credit bureaus and other sorts of intermediaries.”
So, what does this mean, exactly? Crypto banking is becoming recognized. Goldman Sachs recently announced its pursuit of digital custodial services, which solidifies a framework for the growth of more markets for digital assets. The OCC’s position on crypto asset custody means that now, all FDIC-insured and uninsured trust banks have the support of regulators to participate in the cryptocurrency space.
De-risking an industry in this way provides economic incentive to create. In banking, innovation springs from attempts to speed execution or accelerate fraud detection. UnFederalReserve’s “credit vs cash” spot market is currently in discussions with potential partners who either hold or are pursuing OCC approval for this reason. Once its software seamlessly emulates traditional banking processes using DeFI protocols, organic growth will come from the users that enjoy the benefits of the product, and the traditional banks looking to bolt on loan-making efficiency. Anchorage Bank, as another example, already manages large-scale crypto transactions and can start creating in the product and settlement space today.
UnFederalReserve will start demonstrating its first product through DeFI protocols by making true, “safe harbor” commercial loans. As issues are resolved, the company will then work with a compliant sponsor bank to originate loans outside the bounds of “safe harbor” lending rules. This bank would be the lender of record, underwriting loans based on UnFederalReserve’s criteria. We would then market the product and manage the take-out vehicle. The final stage would be expansion and incorporation of the product into the bank or bank-owned SPVs directly, or, a national trust that holds the new OCC crypto bank charter.
Institutional adoption comes with greater regulatory certainty. Anchorage Bank directly benefits from this development, and for UnFederalReserve, a clear path to compliant large-scale lending now exists.