Congressional Democrats voiced their skepticism Thursday toward new a new type of banking charter that would grant some privileges to financial-technology and cryptocurrency firms that national banks enjoy, without subjecting them to the same degree of regulatory oversight.
“State regulators, community banks and credit unions have raised alarms about how new entities, including big tech firms, are receiving unconventional bank charters and offering bank products and services while evading regulations most banks, including community banks, must comply with,” said Rep. Maxine Waters of California, the chairwoman of the House Financial Services Committee, during a subcommittee hearing on the topic Thursday morning.
“The [Office of the Comptroller of the Currency] has overstepped its authority, pretending that laws signed by Abraham Lincoln were intended to create charters for fintech or cryptocurrency,” Waters, a Democrat, added.
Under the Trump Administration, the OCC — the regulatory agency within the Treasury Department responsible for granting national banking
charters — developed a new fintech banking charter that would enable fintech firms to offer lending and payment products, without taking deposits or FDIC insurance or being overseen by state banking regulators. The agency was first created during the Lincoln administration, when the national banking system was established.
The policy was administered energetically by Brian Brooks, who served as acting comptroller of the currency for much of last year, and previously served as as the chief legal officer at Coinbase
the crypto exchange company that debuted on public markets Wednesday with a market capitalization of more than $65 billion. Brooks told the committee that these charters were necessary against the backdrop of extensive consolidation in the banking industry that has seen the number of American banks shrink from 8,315 in 2000 to 4,519 in 2019.
“The rise of nonbank financial service providers, and in particular fintechs, is the result of market forces that include the dramatic reduction bank branches…the most in rural and urban low and moderate income communities,” Brooks told the committee, adding that he thinks “innovative technology emerged allowing fintech companies to provide consumers with better alternatives to traditional banks on the one hand and strip-mall financiers, like payday lenders, on the other.”
Brooks went on to argue that to deny fintech and crypto companies banking charters would actually lead to those companies being less well regulated and to activity that was once overseen by state and federal regulators to “go on outside their view.”
Rep. Patrick McHenry of North Carolina, the ranking Republican on the financial services panel, agreed that Brooks’ approach at the OCC was the right one.
“Consumer and business preferences have and continue to evolve. The private sector is innovating to meet the wants and needs of all consumers,” he said. “We should be encouraging our regulators to seek regulatory requirements that fit these advancements, not hinder them.”