Figure Technologies Inc., a promising digital assets banking industry contender, recently abandoned its aspiration to obtain a federal banking charter in the United States. This withdrawal culminates an intense three-year ordeal, signifying an essential development in the tumultuous relationship between regulatory bodies and crypto-related activities.
The Tumultuous Journey to Federal Approval For Figure
The company first submitted its application for federal approval in 2020. It garnered considerable attention from industry watchdogs and state banking regulators. Wall Street lobbyists didn’t spare the venture from their scrutiny either. Traditional banking entities viewed Figure as a potential harbinger of a new competitive wave. The firm would be unfettered by the stringent compliance requirements incumbent lenders regularly face.
Figure sought the coveted banking charter to consolidate nearly 200 state licenses for its nationwide financial operations. This bold move, the company stated, was a strategic attempt to streamline its U.S. financial activities.
Revising the Plan: A Commendable Approach
In a welcome twist, Figure found a staunch supporter in Michael Hsu, the acting chief of the OCC at the time. Hsu lauded the company’s readiness to amend its banking plan to incorporate federal deposit insurance. He also voiced his eagerness to evaluate Figure’s application without legal conflicts instigated by state regulators. Yet, in a surprising turn of events, the charter application was formally withdrawn on July 31, as per the OCC’s records.
“Reorienting our growth trajectory around an extensive set of well-established bank partners has compelled us to withdraw our banking charter application,” declared Figure Technologies in an official statement. The news of the company relinquishing its pursuit of the charter was well-received in some quarters.
In response to the news, Jesse Van Tol, the CEO of the National Community Reinvestment Coalition, claimed, “The withdrawal is a victory for stability, safety, and appropriate supervision in our financial system.” He accused Figure of inadequate planning to fulfill the standard obligations under the Community Reinvestment Act.
The Crypto-Skeptical Regulatory Landscape Curbs Figure
Anchorage Digital successfully obtained its OCC charter in 2021. However, Paxos and Protego, other hopefuls aiming to replicate Anchorage’s feat, were less successful, unable to convince the increasingly crypto-skeptical regulator before their provisional approvals lapsed.
The OCC, Federal Reserve, and the Federal Deposit Insurance Corporation had previously seemed open to crypto businesses. They had sought to carve out a niche for these ventures within the banking sector. However, they have adopted a more cautious stance. It underscores the potential risks inherent in the crypto industry. Moreover, these entities advise existing banks to curtail their exposure to this volatile sector.
A Change in the Digital Banking Landscape
The withdrawal of Figure Technologies from its pursuit of a federal banking charter underscores the complex interplay between digital asset banking, cryptocurrency, and the regulatory environment in the U.S.
It is a stark reminder of innovative ventures’ challenges when operating within an evolving and increasingly scrutinized landscape. The story of Figure Technologies will likely remain a significant case study in the annals of digital banking and crypto regulations in the U.S.
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