Bank's Pursuit of Licensing Encounters Disruption

Ripple, a prominent crypto company, has made a move to deepen its integration into the traditional financial system by applying for a national bank charter in the United States. The application, announced by Ripple's CEO, Brad Garlinghouse, in July, aims to provide the company with access to the Federal Reserve's payment system, achieve regulatory clarity, and strengthen its institutional credibility in cross-border payments and digital asset custody.

The move by Ripple seems more about vertical integration and reducing reliance on third parties. If successful, digital asset firms like Ripple would benefit from faster settlement times and lower costs, making transactions more efficient and cost-effective.

Earlier this July, Bluechip, the stablecoin rating agency, attached its top ranking to RLUSD, Ripple's native stablecoin. This recognition adds to the company's credibility in the digital asset space.

Similar applications have been made by companies such as Circle and BitGo, as the collective pursuit of a national charter is aimed at building credibility and deepening assimilation into Main Street. National trust banks, which are federally chartered, cannot accept deposits or make loans unlike conventional banks. However, they can custody assets, oversee client funds, and overlay relevant financial products.

If granted, Ripple would be able to hold reserves of RLUSD, its native stablecoin, with the central bank. This would allow the company to circumvent intermediary banks, streamlining the process and reducing potential delays.

The application process for these charters needs to be approved by the Office of the Comptroller of the Currency. Two further crypto laws, namely the Clarity Act and the Anti-CBDC Surveillance State Act, remain pending. The recently signed GENIUS Act, which regulates stablecoins, adds a layer of legal framework to the industry.

President Trump's crypto-friendly policies have been supportive of the increasingly aggressive moves by crypto firms. Tim Chen, global head of strategy at Mantle, a blockchain financial technology firm, sees blockchain-driven entities as legitimate custodians of value capable of coexisting with and complementing established banking systems.

However, the path to regulatory approval is not without challenges. The charter applications of Ripple and Circle, among others, are pending. The success of these applications could set a precedent for the future of digital asset firms in the traditional banking landscape.