'Two cops on the beat': Regulator wants sole authority to charter fintech firms

Brian Brooks, the acting head of the U.S. Office of the Comptroller of the Currency and former chief legal officer to Coinbase, has warned against the Consumer Financial Protection Bureau receiving the right to grant “Fintech Charters.”

Earlier this week, the CFPB’s Taskforce on Consumer Financial Law published a report featuring 102 policy recommendations intended to “improve and strengthen” financial regulations, including proposing that Congress empower the CFPB to federally charter nondepository institutions — financial firms that do not take customer deposits and collect fees for other financial services.

Under Brian Brooks’ leadership, the OCC created the Special Purpose Payments Charter for FinTech in 2020, paving the way for certain crypto firms to apply for recognition as a national bank. Paxos and BitPay sought approval for chartering under the new regime in December.

Should the CFPB be extended the right to charter fintechs, it could reduce regulatory clarity as to which agencies non-depository crypto firms should apply to, and create overlaps between the mandates of the two agencies.

In a Jan. 6 statement, the acting OCC head pushed back against the CFPB’s request for the right to charter fintechs, warning the move would undermine legislation intended to separate the regulatory responsibilities of the two agencies after the 2008 financial crisis:

"In its wisdom, Congress in the Dodd-Frank Act separated chartering and prudential supervision from consumer protection enforcement, assigning chartering authority to the OCC and specific consumer protection enforcement authority to the CFPB."

Brooks argued the existing dynamic “should be preserved” to ensure that neither regulators responsibilities overlap, noting “the additional protections implemented following the last financial crisis [...] separated those responsibilities so neither would be compromised in service to the other.”

“That dynamic should be preserved so that the CFPB continues to enforce compliance with enumerated financial consumer protection laws for the financial companies designated by the Dodd-Frank Act, while at the same time avoiding the creation of a prudential supervision gap that could lead to serious safety and soundness risks.”

On Jan 4, the OCC published guidance informing national banks they can use public blockchains and dollar stablecoins for settlement, run nodes and act as validators for blockchain networks.