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Varo Lands Historic Fintech Banking Charter As OCC Makes Big Moves

As the world celebrated the godfather of banking, Cosimo Medici, on World Fintech Day, one can’t help but wonder what he would think about the institution he helped create now holding currency that, well, can’t really be held at all.

medici 166743 640Just ahead of the August 1 holiday—Medici died August 1, 1464— the Office of the Comptroller of the Currency (OCC) published a letter explicitly stating federal savings institutions and national banks can hold cryptocurrency for customers. “In the letter published today, the OCC concludes that providing cryptocurrency custody services, including holding unique cryptographic keys associated with cryptocurrency, is a modern form of traditional bank activities related to custody services,” reads information from the OCC.

Add that to the Varo Money announcement, it has been granted a national bank charter from the OCC. And, now has the regulatory green light from both the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) to open “Varo Bank, N.A,” the world Medici left looks increasingly foreign. According to information from Varo, this is the first national bank charter granted to a U.S.-based consumer fintech.

“This is a thrilling milestone for Varo, as the bank charter has been a core part of Varo’s disruptive vision from the very beginning,” said Colin Walsh, founder, and CEO of Varo Bank, in a statement. “2020 has been challenging for many of us across the country and has highlighted, once again, how the traditional financial system is not meeting the needs of hardworking, everyday Americans. The ability to operate as a full-service national bank gives Varo more freedom to deliver the kind of innovation and allyship that many Americans have never had from their bank before. We are excited to lead a new wave of financial inclusion by offering fair, transparent, intelligent, and comprehensive financial services to all.”

FROM TWITTER

MansoorSafii @MansoorSafii Jul 27

"OCC letter clarifies that national banks have the authority to provide fiat bank accounts and cryptocurrency custodial services to cryptocurrency businesses."

@HaileyLennonBTC https://www.forbes.com/sites/haileylennon/2020/07/22/bitcoin-meets-banking-as-us-bank-regulator-permits-cryptocurrency-custody/#649101865479

Per information from Varo, the company officially kicked off its digital banking operation in July 2017. At the time, it offered a number of banking services in cooperation with The Bancorp Bank.

“Granting a national bank charter to Varo marks an evolution in banking and a new generation of banks, born from innovation and built on technology intended to empower consumers and businesses,” said Brian P. Brooks, acting comptroller for the currency. “Each national bank charter granted by the Office of the Comptroller of the Currency signifies the bank has survived our rigorous vetting and meets the standards and qualifications necessary for it to operate across the country under a single, uniform regulatory framework.”

States Also Getting in the Game: Wyoming Taps Avanti for Its Own Charter

According to the Avanti Financial Group, it has been given notice from the Wyoming Division of Banking that its charter was accepted and its timeline accelerated. Avanti expects to be open for banking in October, the report reads.

“Our charter application incorporates truly novel ideas that have received detailed scrutiny from multiple regulators. It is the culmination of an enormous effort by Avanti’s fantastic team—several thousand hours of planning and work with regulators, and hundreds of pages of supporting policies, procedures and documentation,” said Caitlin Long, founder and CEO in a statement.

In that same announcement, the company also touted a new product, Avit, aka “the stablecoin disruptor.” The new offering is “not a security,” can only be issued by banks and will “likely be treated as a cash equivalent.” Avit offers legal security, the company states, as it will be issued under existing commercial law. It is designed to offer “real-time payment settlement” that does not suffer from some of delays associated with stablecoin.

Long, who once served on a blockchain task force in the state, also said she was glad to see the OCC join Wyoming in allowing banks into the crypto-custody game, although she said Wyoming has a bit of a head start compared to the rest of the Union.

“The OCC and 49 other states do not yet have in place the comprehensive legal structure necessary for enabling digital asset custody without significant legal risk. They also do not have a roadmap for courts to adjudicate disputes involving digital assets and do not provide the certainty in bankruptcy that Wyoming provides for digital asset custodians,” she said. “Its prudential standards make Wyoming the only jurisdiction in the U.S. where digital asset custody in a bank can truly be executed in a safe and sound manner.”

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