ICYMI: The Banks of Tomorrow

Payments and stablecoin firm Ripple Labs Inc. and crypto custodian BitGo Inc. have applied for national bank charters, joining a crush of upstart financial services companies seeking such approval. BitGo, which custodies billions of dollars in crypto assets for clients, is weighing an initial public offering as soon as this year, Bloomberg News previously reported. The custodian’s corporate structure already includes two state-regulated trust companies, one in New York and one chartered in South Dakota.

Bloomberg News personal finance reporter Paige Smith details the push by tech-focused firms into the traditional US financial system. Paige speaks with Tim Stenovec and Emily Graffeo on Bloomberg Businessweek Daily.

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Episode Transcript

Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Business
Week with Carol Masser and Tim Steneveek on Bloomberg Radio.

Speaker 2 (00:14):
Well, crypto currency, cryptocurrency companies, We'll try that again, are
rushing to bridge the gap between mainstream finance and digital
assets under the Trump administration, from stable coin company Circle
going public to Emily more and more so called old
coins being offered in traditional exchange traded funds.

Speaker 1 (00:33):
I know about that.

Speaker 2 (00:34):
That's like your thing, right, that's like my thing? Do
you write about that? Old coins and ETFs?

Speaker 3 (00:38):
I do you know my we I think he pitched
this ald coin crypto ETF summer. I'm like, okay, we
don't need to make these little I.

Speaker 2 (00:48):
Heard of brat summer and the crypt What is it again?

Speaker 3 (00:50):
What did you say, crypto ETF summer.

Speaker 2 (00:52):
It doesn't have the same the time, No, it does
the color associated with it, Yeah, brat summer.

Speaker 3 (00:58):
There was like the it was a line. I guess
crypto would maybe be gold. I don't know, because it's
digital gold in any in any way. In the latest
moves of this crypto to tradify bridge the gap, closing
payments and stable coin firm Ripple Labs and also crypto
custodian Bitco have applied for national bank charters. Paige Smith,

(01:19):
she's the Bloomberg News consumer finance reporter, joins us now
in the interactive Bloomberg Interactive Broker Studio. You wrote the story,
maybe we could just start with what are Ripple Labs
and bitgo and why do they want bank charters?

Speaker 4 (01:32):
That is a great question, Emily, and I do think
I agree. Let's not try to make bitcoin or ETF
summer happen, but it could be the summer I campaign
for bank charter summer. I think that's better and it's
just so perfectly nerdy for my kind of beak. But
it so as you said, Bicco and also Ripple. But

(01:56):
there are a number of folks who want bank charters
right now. It's fintech firms, it's cryptocurrency companies, it's automakers,
it's this is just to step back for a second,
This is not a new phenomenon. There have been companies
that have been wanting to be banks that are not
traditionally banks for a very long time.

Speaker 2 (02:16):
Okay, this is what I don't understand. You've covered fintech companies,
you do cover fintech companies. Chime, for example, doesn't want
to be a bank, but they want to offer banking services.
What's the delta here, what's the difference?

Speaker 4 (02:29):
So Chime is different because they make their money off
of payments, specifically, so every time you swipe your card,
they make a fee off of that, and that is
or tap your card whatever. That is how they make
their money. But they if you make your money in
that way, you have to work with a bank, and
if you lend to anyone, you have to work with

(02:49):
a bank in order to you you know, Chime cannot
officially accept deposits yourself. You have to work with a
bank to accept.

Speaker 2 (02:58):
So I thought the reason that these FinTechs don't want
to be banks is because then they're regulated under a
different set of rules.

Speaker 4 (03:03):
Also, that's correct, that's part of it. But if you
apply to be a bank, you do have, as Emily said,
you have more stability in the financial system. You can
do other things that previously you wouldn't have had to
you would not have been able to do, and you
don't have to rely on that third party. You just
have more control over the situation. And it's changing because

(03:26):
under the Trump administration, there's actually an appetite to essentially
give these bank charters out. Under the Biden administration, that
was not the case. There was no forward movement on
the regulatory and the regulatory landscape. Even if you wanted
to be a bank, your shots of becoming one were

(03:46):
slim ton.

Speaker 3 (03:47):
So is this about the Trump administration being looser or
more friendlier to the crypto industry or is this bigger
than that, This is the Trump administration just wanting to
hand out more bank charters at large.

Speaker 4 (03:59):
I think think that that is it's a little bit
early to say we have seen a heck of a
lot of applications. We haven't seen these applications approved just yet.
We've seen some approved, But no, there's not enough information
I would say to say, there's not enough information out
there to say yes, definitely, the Trump administration is, you know,

(04:22):
totally okay with giving every crypto company that applies a
bank charter. That's not the case yet. However, you can
look at the other indications from the Trump administration's regulatory
agenda to surmise that there are certainly there's certainly a
lighter regulatory touch or a more welcoming approach, if you will,

(04:42):
to cryptocurrency firms.

Speaker 2 (04:44):
Generally, in the United States, when you have money in
a bank, you have an understanding that this money is
protected by the Federal Deposit Insurance Corporation the fdiice, could
we start to see some sort of guarantees on digital
assets as a result of these banks charters.

Speaker 4 (05:01):
So it depends on the kind of bank charter that
they're applying for. It not to be super nerdy, but
I forget exactly which company was, but one of the
firms that have recently applied applied for a national bank charter,
in which case you would also need to apply with
the FDIC to get that kind of insurance. That is

(05:22):
not the case for all kinds of bank charters. So
you know, some folks may apply for a sort of
more narrow bank charter, sort of like an industrial loan charter,
as Nissan, for example, as applying for. So it would
be an automaker. From an automaker's perspective, it would more
easily allow them to lend or hand out auto loans

(05:45):
for their customers. They wouldn't have to work with a
you know, we'll pick on ally for a second, an
auto lender, but in terms of the to go back
to your original question for digital assets being essentially guaranteed
by the FDIC, I think it's a little bit early
to see on that.

Speaker 3 (06:02):
What about I mean, I know it's very early in
the stages of this potentially getting approved. But for Ripple
and Bitco, for these crypto companies, have they said anything
about like ideally what they would want to be able
to do with the bank charter.

Speaker 4 (06:17):
Yes, there's extensive, there's extensive. There are extensive filings that
sort of clarify exactly what they want. But again, I
think it really is it's sort of this sense of inertia,
right like, if they want to do this and this
is on their strategy roadmap, now is the time to
do it. This process takes time.

Speaker 2 (06:36):
What you wrote about and what you've been writing about.
Are these not necessarily digital upstarts at this point, but
they're not the incumbents by any means when it comes
to digital asset companies or asset managers. We see these
companies trying to become more traditional. Are we going to
start seeing the big banks become holders of digital assets

(06:59):
or start to serve in service this group of clients.
We know what Jamie Diamond has said for years about bitcoin,
he's not a fan.

Speaker 4 (07:07):
I think that it is early in the stage, and
it's early in the game, and I wouldn't rule anything
out at this moment in time. I mean, if you
look at folks expressing interest in stable coins, for example,
you've seen big banks express interest, You've seen big retailers.
There have been reports of retailers expressing interest. I think

(07:27):
there is a lot of runway here of sort of
decentralized finance wanting to be more traditional, but also traditional
finance wanting to be more decentralized and a little more
hip and modern.

Speaker 3 (07:40):
That's very nerdy, sorry, hip and modern banking summer.

Speaker 1 (07:44):
There it is.

Speaker 2 (07:45):
I was waiting for that. Thank you, Emily, Thank you
Page Page Smith, Bloomberg News consumer finance reporter. Check out
her story and more on the Bloomberg Terminal, also at
Bloomberg dot com.