In an announcement that has stirred up a hornets nest of controversy, the OCC (Office of the Controller of the Currency) – an independent bureau within the US Department of Treasury – has announced that FinTech startups which satisfy specific requirements can apply for special bank charters. Needless to say, the DFS – who were not consulted – are not best pleased!
The New York State DFS (Department of Financial Services) has made its position clear on the recent announcement by the U.S. Department of Treasury’s OCC endorsing special bank charters – known as “sandboxes” for certain FinTech startups. The DFS position is one of formal opposition, and was presented via a statement on the official DFS website by Maria T. Vullo, DFS superintendent, in charge of New York State’s “BitLicense” agenda.
A BitLicense is the term used to describe a business license for virtual currency activities, issued by the New York State Department of Financial Services (NYSDFS), and limited only to New York residents and for activities happening in the state of New York.
OCC Sticking To Their Guns
Despite this pressure from the DFS to reconvene, the OCC or Office of the Comptroller of the Currency, which while an independent bureau, is still very much part of the US Department of Treasury, aren’t budging. The OCC claim that the National Banking Act grants them the authority to give out charters with which national banks and special purpose national banks can do business.
Startup FinTech companies that match the desired criteria and have ambitions to do business on a national scale can then apply for these bank charters. This would seem to be an excellent option for any ambitious FinTech startup which is lacking strong financial backing.
DFS To Challenge Ruling
However, this story looks like it still may have a few twists and turns to go before its completion. Despite the fact that they are both in effect government agencies, the New York DFS have taken the step to file an actual lawsuit challenging the OCC’s authority to grant FinTech companies special-purpose national bank charters. A bullish Superintendent Vullo disputes the OCC proposition, saying:
“Toddlers play in sandboxes, adults play by the rules.”
Vullo believes that any genuine company with ambitions to create lots of jobs and have long-term prosperity needs to develop their ideas and protect potential customers within a strong state regulatory framework.
Vullo and the DFS further believe that the OCC will soon discover that their decision to start accepting applications from FinTech for bank charters was premature, and that they are in fact not authorized under the National Bank Act to do so. Stand by for further updates.