The rollercoaster ride of Figure Technologies, Inc., seeking to become a federally chartered bank in the U.S, seems to have hit a significant roadblock. The firm’s decision to pull the plug on its application follows a challenging three-year journey marked by stern regulatory scrutiny and blackened outlook towards the digital assets banking space. This came in the aftermath of the fall of some regional lenders connected with the tech world earlier this year.
When Figure first lodged its application in 2020, it found itself under the watchful eyes of Wall Street lobbyists and state banking regulators, even before the Office of the Comptroller of the Currency (OCC) seriously considered it. Established financial institutions were worried that Figure might herald the arrival of a novel breed of competitors that didn’t have to abide by the same rigorous compliance regime that they did.
The tech-driven company hoped to use the charter as a tool to simplify about 200 state licenses it was holding for nationwide financial operations. Yet, the charter was officially withdrawn on July 31, leaving many wondering about the firm’s next moves.
Former acting OCC chief, Michael Hsu, had, in fact, praised Figure’s readiness to revise its banking plan and agreed to seek federal deposit insurance. This offered a ray of hope for the tech firm to be considered on a neutral ground without encountering legal resistance from state regulators. However, the silver lining seems to have clouded over.
On the other hand, industry actors like Jesse Van Tol, president and CEO of the National Community Reinvestment Coalition, voiced relief over the news. Van Tol took issue with Figure’s alleged lack of effort to fulfill the Community Reinvestment Act obligations, a staple for any bank.
This development may not be a stand-alone case. Anchorage Digital was successful in obtaining its charter from the OCC in 2021, and two others, namely Paxos and Protego, were not as fortunate as their conditional approvals ran out before gaining favor from the skeptical regulator.
In recent times, regulators, including the Federal Reserve and Federal Deposit Insurance Corp., have voiced concerns about the inherent risks of the crypto industry, advising conventional banks to minimize exposure to the unstable sector. Conclusively, the tale of Figure Technologies underscores the bumpy ride that crypto-focused entities face navigating the traditional banking landscape.
Source: Coindesk
