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Anchorage gets OCC’s first national charter to a crypto bank

Custody pioneer Anchorage is the first crypto firm to see a charter from the U.S. national bank regulator.

Per a Wednesday announcement from the Office of the Comptroller of the Currency, Anchorage will have conditional authorization to operate as a trust institution nationally.

Per the announcement, Anchorage’s continued charter will hinge upon unique requirements:

“As an enforceable condition of approval, the company entered into an operating agreement which sets forth, among other things, capital and liquidity requirements and the OCC’s risk management expectations.”

The actual agreement between Anchorage and the OCC specifies a po

Hitherto, such registration was done state-by-state. The OCC’s ambitions for a federal charter stretch back to the time of Barack Obama, but current Acting Comptroller Brian Brooks has been a notable advocate pushing for an accelerated timeline on such authorizations. 

Nonetheless, state regulators have expressed concern that the OCC’s push to charter non-depository institutions represents a threat to their authority. 

This story is breaking and will be updated.

Anchorage gets OCC\’s first national charter to a crypto bank

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SoFi to Go Public in $8.65 Billion SPAC Deal with Chamath Palihapitiya’s Social Capital

Chamath Palihapitiya, CEO of Social Capital (NASDAQ:IPOE), has announced that SoFi will go public via a SPAC deal that is worth $8.65 billion via CNBC

According to a Tweet by Palihapitiya, his thesis is based on the challenges of incumbent banks and the benefits of Fintech and digital banking.

Palihapitiya says that SoFi has built a best in class digital banking solution. SoFi reports 1.8 million predicted to top 3 million users in 2021. The company was launched as a student loan refinancing platform but, over time, has iterated and expanded into other verticals and markets. Today, SoFi is more of a digital bank and investing platform with a dedicated community than an online lender. It was reported in mid-2020, that SoFi has filed for a national banking charter.

Anthony Noto said that he and Palihapitiya are super aligned with the goals of SoFi.

“Setting really high, loft goals,” said Noto. “We can really do a much better job of explaining the opportunity together.”

Noto predicted SoFi would do a lot of things together strategically with Social Capital. He added that they spent 2020 preparing for this event.

And why a SPAC versus an IPO? Noto says a SPAC will allow them to better educate investors – a process that is superior to a traditional IPO.

Additionally, deal certainty is a feature of a SPAC that Noto said drove their decision. He pointed to S-1s filed by firms that, in the end, do not get done.

In 2020, SoFi’s revenue was said to be at $621 million. In 2025, SoFi anticipates revenue of $3.67 billion.

SoFi expects to hit profitability in 2021 delivering $27 million to the bottom line. In 2025, net income is predicted to rise to $1.17 billion.

SoFi has built the AWS of Fintech said Palihapitiya. He also pointed to the fact that SoFi not only serves consumers but is also in the enterprise space providing services to Fintechs like Chime.

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Fintech Professional Says Challenger Banks are Disrupting Banking Sector in a “Big Way” by Improving Customer Experience

Mr. Potter Banker Banking (1)

Mr. Potter Banker Banking (1)Last year, we saw many banking challengers offering services to customers who might not have been satisfied with their traditional bank. Many more people also began to use online banking services due to the COVID-19 pandemic which forced many physical business locations to shut down.

Marwan Forzley, Co-Founder and CEO at Align Commerce, a payment service provider for global commerce, notes in a blog post published by Payments Source that challenger banks are still quite small when compared to traditional financial institutions. But they’re “disrupting” the banking sector in a “big way” by changing “the fundamental and antiquated experience we’ve come to expect.”

Forzley points out that Deloitte’s “DNA of Digital Challenger Banks” report states that “challengers have developed a product offering and channel experience that targets the points of the value chain where incumbents’ weaknesses are most exposed and often not easy to fix.” In 2020, we saw Fintech challengers (like Current) offer certain services that cater to the financially underserved — such as SMEs, Millennials and underbanked consumers, Forzley confirmed.

He added that digital-only banks (like Revolut) have launched services that specifically aim to serve corporate or business clients. They may offer advanced tools and features (for example, access to working capital, accounting integrations, online wallets, and payment scheduling). These tools may be accessed from a laptop or mobile device — “without the processes, complexities or red tape that incumbents are known for,” Forzley claims.

He also mentioned that there’s a “wide open market with plenty of opportunity not just for challenger banks but for financial technology as an industry to set themselves apart from incumbents to gain market share.”

In 2020, we saw an “unprecedented” level of investment into Fintech firms, Forzley noted. He pointed out that the opportunity for growth within the payment and banking sector is driven by the need to solve or address clear problems and develop “tech-forward solutions” that are “readily available” to serve individuals and companies. He claims that VCs and incumbents are interested in funding “innovative, agile products and services that improve on the speed, accessibility and transparency issues that are widespread throughout traditional financial institutions.”

He concluded:

“[The] winners will be determined by how novel their offering is. In order for the leaders in the space to survive against incumbents and against each other, challengers will need to focus on ensuring their services are more innovative and different compared to what exists today. If the service is going to yield minor incremental changes, it won’t be enough for the challenger to truly take off. The services that will do well are the ones providing a fundamentally different and forward-thinking customer experience.”

As reported recently, digital banks and Fintech challengers must show they can generate profits, because investors are expecting returns.

Investors have been pushing banking challengers to show them how they can generate sizable profits by effectively monetizing their products and services. Industry analysts expect that the neo-banking sector will have to consider consolidation opportunities and seriously begin to focus on achieving profitability in a post COVID environment.

As covered, Fintech adoption is on the rise globally with over 250 digital banks operating in major financial markets, according to a new report from Exton.

The report noted:

“On their quest for monetizing customer relationships neobanks have learned a first lesson: payment transaction fees, premium account subscription fees, or open banking commissions from brokering 3rd party services will in most cases not be sufficient to generate profits or breach beyond operational break-even. Our expectation much rather is that Neobanks will need to offer additional products to jump the gap to sizable profitability.”

The report added:

“Irrespective of which path neobanks will take, we remain convinced that they will need to shift into profitability mode quickly as investor patience will not be unlimited. But for those that select the paths right for them, stay focused on it and grow up as an organization, the future remains bright and full of opportunities.”

Exton suggests that some Fintechs or neobanks may want to consider offering digital or lending services which should help them diversify their business. Financial technology firms can also look into developing their own super app or offer investment services to the mass affluent market, Exton noted.

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Digital Banking: Fintech Unicorn Revolut’s Customers Spent 2.6x More on Online E-Commerce than On In-Store Purchases

Digital bank Revolut notes in its end of year review that “it goes without saying that 2020 has been a year like no other.” It has definitely impacted all our lives, including how we spend our money and the way we save, the Fintech firm confirmed.

While most people have had to remain indoors a lot more than they might have expected to or liked, staying home also has its benefits, according to Revolut. Many people might have saved a lot of money they’d normally spend while dining out or other costs related to commuting to work and other physical business locations.

As mentioned in a blog post by Revolut, the way we’ve all spent our funds has been “a little different too – we’ve supported our local businesses more, ordered our groceries online and sent digital cash gifts to friends and family across the country and the world.”

A Revolut user spent “on average £561 this year on travel, which is less compared to an average of £997 in 2019.” The digital bank’s customers spent “on average £338 this year on transport, which is less compared to an average of £458 in 2019.”

The Revolut team further noted that the bank’s clients “on average made 3.3 times more transactions on groceries than restaurants this year.” While sharing more details on consumer behavior and spending, the digital bank revealed that its customers “on average spent 2.6 more times on online shopping than on in-store purchases this year.”

As noted by the Fintech firm, its clients spent “on average £287 with top takeaway vendors (Deliveroo, Just Eat, Uber eats, Wolt, Glovo, takeaway.com) this year, up from an average of £182 per user in 2019.”

While sharing other updates, the Revolut team confirmed:

“From January 1, 2021, new regulations will come into effect across Europe which require most types of Internet payments to be made with an extra security layer called 3D Secure (or 3DS). These same regulations will also require card issuers to decline certain payments if they weren’t processed using this extra security layer.”

What these changes mean for consumers is that large online payments without the merchant asking customers to complete 3DS will be declined by Revolut as part of its “regulatory obligations.”

As explained by the Revolut team, 3DS adds additional security to card payments made via the Internet. The bank does this by asking its customers to verify their payments in the Revolut app before they approve it with the merchant.

So even if a bad actor or fraudster gains access to a customer’s card details, they won’t be  able to use them to conduct digital payments “where 3DS is involved.” The card holders would receive an alert asking them to verify the payment and can reject it with just a tap in their Revolut app. (Note: to learn more about this update, check here.)

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Rumored US crypto wallet restrictions: A step toward financial exclusion

The crypto community has a saying: “Not your keys, not your coins,” which means that if you hold your crypto on a third-party custodial wallet, you don’t truly have ownership of the coins. The entity controlling the private key of the wallet ultimately has power over it. Self-hosted wallets, or non-custodial wallets, allow individuals to receive, send and store their own cryptocurrency without the need of a custodial entity.

As life has become increasingly more digitized, the use of cash for transactions and as a store of value has declined considerably. For those in our economy with access to digital resources, online transactions and money services have taken over. However, many individuals stuck in the cash economy do not have the luxury of shopping online or making use of the efficiency of digital transactions.

Related: Americans don’t want to give up their paper money, but they should

According to the Federal Deposit Insurance Corporation’s 2017 survey of unbanked and underbanked households, approximately 6.5% of households in the United States do not hold an account with an insured financial institution. Almost 19% of households are underbanked, meaning that while they hold at least one account at an insured institution, they still utilize financial products, such as payday loans or cash-checking services. Reasons for these individuals being underbanked can vary from past financial mistakes, a lack of trust in financial institutions, not having enough money for the minimum balance, or wanting to avoid fees. These reasons remained relevant two years later, according to the FIDC’s 2019 survey, where a lack of trust is among the top reasons.

Self-hosted wallets create the value thesis of cryptocurrencies. They allow anyone secure, equal access to a large and growing amount of financial tools, such as DeFi or staking, enabled by blockchain technology. Individuals with these wallets are able to access these tools and securely send money without a third-party intermediary — an impossible feat before the invention of Bitcoin (BTC). These peer-to-peer transactions do not require an intermediary entity because the act of “cutting out the middleman” is what enables the unparalleled efficiency and financial equality that cryptocurrency provides.

By potentially regulating the use of self-hosted wallets, the U.S. government would be creating a barrier for these underbanked and unbanked individuals from accessing cryptocurrency and hindering the greatest catalyst of financial inclusivity the world has ever seen. At the same time, they would also be giving more power to intermediaries in the cryptocurrency space. An internet connection is all that is needed to interact with the global financial system. This is a huge step forward in providing financial freedom to all, making financial services available to the billions who currently lack access. By removing this feature, the government would be rendering cryptocurrency useless to Americans without the specified identification.

Related: How US authorities are using old AML tools to crack down on crypto

In addition, wallets aren’t just digital bank accounts — they’re digital safes. A self-hosted wallet allows people to store all types of digital assets from important documents to tokenized real estate to fiat-tethered cryptocurrencies. Taking away an individual’s right to own their own physical safe would be ludicrous. Taking away the right to own a digital safe is tantamount to an infringement on the rights of Americans.

Cryptocurrency has seen more growth and created more wealth than any other invention in recent history. The U.S. is at the forefront of this boom and has seen immense growth of many companies, the creation of thousands of new jobs and greater financial independence of its citizens as a result. Imposing a regulation that requires wallets to be custodial would put the U.S. behind the eight-ball by stifling innovation and hindering widespread adoption. While other countries continue to use cryptocurrency in its fairest and most streamlined form, the U.S. would be throttling the growth that cryptocurrency’s free market facilitates.

The blockchain ecosystem is still in its infancy, and its true potential hasn’t even been close to realized. Regulating such an important aspect of this new and useful technology would have disastrous repercussions on innovation within the crypto space, likely preventing the future invention of revolutionary products and services that will live on the blockchain.

Related: Friendliest of them all? These could be the best places for crypto

A clear and concise regulatory framework is something the cryptocurrency industry needs, but this is not the approach to take. When creating new regulations, the U.S. government must collaborate with industry professionals and scholars to find a solution that creates strong consumer protections, stimulates innovation and ensures that all cryptocurrency users have secure access to essential financial services.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Ben Weiss is the chief operating officer of CoinFlip. Ben leads a team of 40 employees and has overcome the logistical challenges of building out CoinFlip’s ATM network infrastructure from the ground up. He graduated from Vanderbilt University with a degree in economics and is a trustee of the New Jersey Blockchain Coalition and a board member of the Blockchain Advocacy Coalition. He’s looking forward to watching the crypto space evolve from a niche industry to a global force.

Rumored US crypto wallet restrictions: A step toward financial exclusion

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