Coinbase Pursues Federal Payments Charter Amid Shifting Crypto Regulatory Landscape

Coinbase's federal charter application with OCC coincides with House-passed FIT21 Act and Fed Chair Powell's dual oversight stance, testing crypto's banking integration pathways.

Coinbase formally requested a federal payments charter from the Office of the Comptroller of Currency on 3 July 2024, seeking to establish federally regulated payment rails and custody services while lawmakers advance new crypto banking rules.

Strategic Timing in Regulatory Flux

Coinbase's 3 July charter application to the OCC follows three pivotal developments:

1. The House's 30 June passage of the FIT21 Act, creating CFTC-dominant crypto oversight (CoinDesk)

2. Federal Reserve Chair Jerome Powell's 2 July testimony emphasizing "dual-layer supervision" for stablecoin issuers (Reuters)

3. Circle's 28 June partnership with BNP Paribas for MiCA-compliant USDC reserves in Europe (The Defiant)

Banking Charter Implications

A successful application would enable Coinbase to:

- Custody fiat deposits without state-by-state money transmitter licenses

- Operate payment systems with direct Fed access

- Offer FDIC-like insurance for cash reserves

Ark Invest analysts project this could reduce institutional crypto entry costs by 40% while tripling on-chain liquidity by 2025.

Regulatory Crosscurrents

Powell's 2 July remarks complicate matters: "State-level approvals alone won't suffice for systemically important payment stablecoins." This aligns with SEC's 1 July warning against using bank charters for "compliance arbitrage."

Meanwhile, Paxos' 2023 New York trust charter demonstrates alternative models, while BitGo abandoned similar federal efforts in 2022 citing excessive compliance burdens.

Historical Precedents and Future Projections

The current regulatory push mirrors 2017-2020 fintech charter battles, when Varo Money became the first OCC-approved digital bank. However, crypto's unique risks - highlighted by 2022's FTX collapse - make regulators cautious.

Parallels exist with mobile banking's evolution: Just as 2010's Dodd-Frank Act shaped neobanks, FIT21 could define crypto's next decade. Yet fragmentation risks persist - Coinbase's US-centric approach contrasts Circle's EU strategy, potentially creating regional liquidity silos.

https://redrobot.online/2025/04/coinbase-pursues-federal-payments-charter-amid-shifting-crypto-regulatory-landscape/