Financial Insights That Matter
By Nupur Anand
NEW YORK (Reuters) – Financial technology firms and crypto companies are seeking to become state or national banks in a bid to expand their business under the Trump administration that they view as more industry-friendly, according to more than half a dozen industry executives.
Firms that had been seeking to expand and gain credibility with customers see an opportunity under U.S. President Donald Trump to get licenses that regulators were previously slow or reluctant to approve.
“We have seen a lot more interest. We are working on several applications now,” said Alexandra Steinberg Barrage, a partner at law firm Troutman Pepper Locke. “Is it in full swing yet? I don’t think so. Our clients are being cautiously optimistic, they’re waiting for things to settle,” as the administration installs heads of banking agencies.
Discussions and preparations for bank charters have increased significantly, according to two other sources who are working on potential applications. It has yet to be seen how many firms will follow through, they said.
While an institution needs to deal with more regulatory checks if it becomes a bank, its cost of capital and doing business can go down in certain instances. A license can also give more legitimacy to the business in the eyes of customers and allow it to increase business and market opportunities.
This will also allow firms to reduce their borrowing costs by drawing on deposits, another big advantage, said Carleton Goss, partner at law firm Hunton Andrews Kurth who is working on three such applications.
New banks will also boost industry competition and cater to specific customer groups or regions, industry sources and analysts said.
CHANGE IN ADMINISTRATION
The surge in activity comes after the number of new bank charters granted by U.S. regulators plunged since the financial crisis, reaching a low of only four applications being approved in 2023, according to S&P Global.
“Online companies know that they will be coming under greater regulatory scrutiny,” said Goss. “It makes sense for them to get ahead of the curve, and in turn, get more credibility and capital at a lower cost by applying for a charter.”
Between 2010 and 2023, an average of only five new bank charter applications were approved annually by regulators, compared with 144 a year between 2000 and 2007, Barrage and other regulatory lawyers wrote in a recent open letter that made suggestions about streamlining the process.
Approvals sometimes took years and in some cases were withdrawn by the applicants, the letter said.
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