Ripple Applies for US Banking License, Heating Up Domestic Stablecoin Race – Crypto News

Two days after USDC stablecoin issuer Circle revealed that it had applied for a national trust bank charter in the United States, Ripple Labs made a similar move.

In an X post on July 2, Ripple CEO Brad Garlinghouse confirmed that the firm has applied to the Office of the Comptroller of the Currency (OCC) for a national bank charter.

It’s a growing trend, as crypto and traditional finance continue to converge. Fidelity’s crypto-focused subsidiary, Fidelity Digital Assets, has also reportedly applied for a national trust charter to complement its New York state-issued license. Anchorage Digital actually received one under the Biden Administration — becoming the first and only crypto firm to get a national bank charter in the U.S., as The Defiant previously reported.

A national bank charter would allow Ripple to engage in fiduciary activities like managing assets and acting as a trustee or custodian.

Citing Ripple’s “long-standing compliance roots,” Garlinghouse noted that if the OCC approves its application, it would have both federal-level oversight, as well as state-level, from the notoriously tough New York Department of Financial Services (NYDFS) via a so-called BitLicense.

That would be, he said in the X post, “a new (and unique!) benchmark for trust in the stablecoin market.”

Circle Internet Group was the first company to receive a NYDFS BitLicense, back in 2015.

In addition to being an original core contributor to XRP Ledger (XRP), Ripple Labs is the issuer of RLUSD, a USD stablecoin. Launched on Dec. 17, RLUSD currently has a market capitalization of $485.1 million, making it within the top-20 stablecoins, but still relatively small.

For comparison, Circle’s USDC has a market cap of $62.2 billion, making it the largest stabelcoin from a U.S.-based issuer, and the second-largest overall. The leading stablecoin by far is Tether’s USDT, with $158.4 billion of the total $264 billion stablecoin market, per CoinGecko data.

Fed Master Account

In addition to the banking license from the OCC, Garlinghouse said that Ripple is also applying for a Master Account with the Federal Reserve, which would give it the ability to custody assets directly with the Fed.

It is doing so through its subsidiary, Standard Custody & Trust Co, which holds an NYDFS limited-purpose trust company charter.

A Fed Master Account would allow Ripple “to hold $RLUSD reserves directly with the Fed and provide an additional layer of security to future proof trust in RLUSD,” Garlinghouse said in the X post.

The stakes are high, said Sid Powell, co-founder and CEO of DeFi asset manager Maple Finance.

“If Ripple were to secure both a banking license and a Federal Reserve Master Account, it would mark a significant milestone in the convergence of crypto and traditional finance,” he told The Defiant, adding:

Maple’s CEO said the dual move would set a precedent beyond the U.S.: “If Ripple succeeds, it could set a precedent that changes the operating model and competitive dynamics for fintechs and crypto firms globally.”

The Master Account may be more of a stretch than the national bank trust charter. Custodia Bank, which holds a Wyoming-issued Special Purpose Depository Institution (SPDI) state banking license created specifically for digital asset firms, has been refused a Master Account by the Kansas CIty Federal Reserve Bank.

Custodia sued, claiming the rejection was unlawful, and lost at the Federal District Court level, the American Bankers Association noted. Custodia is appealing.

Kraken Financial — the state-chartered bank created by centralized exchange Kraken — also has an SPDI, although it has not applied for a Master Account.

In addition to Fidelity Digital Assets, crypto giants BitGo, Coinbase and Paxos are also reportedly considering applying for federal or state banking licenses.

The flurry of license applications comes as stablecoin and broader crypto market regulatory bills are working their way through Congress. The Senate’s GENIUS Act and House of Representatives’ STABLE Act are being reconciled and could be passed as soon as mid-July.

Just yesterday, House Republican leaders dubbed the week of July 14-18 “Crypto Week,” scheduling floor votes on three high-profile crypto bills, including GENIUS and the crypto market structure bill, the CLARITY ACT.

Collecting Licenses

“It’s no surprise that more companies are pursuing banking licenses right now,” Patrick Gerhart, president of banking operations for Telcoin, told The Defiant, explaining that the licenses are crypto’s attempt to gain legitimacy and integrate with the traditional finance sector:

“With the GENIUS and STABLE Acts gaining traction in Congress, the window is opening for a new wave of institutions to enter the banking sector through charters that give them legitimacy and regulatory clarity. Securing an OCC charter—and potentially a Fed master account—is a major step. If approved, they wouldn’t just be experimenting at the edges of the financial system but rather firmly embedded in it.”

Gerhart added that the crypto industry is “entering a ‘first-to-market’ moment for stablecoin-integrated banking.”

Warning that the path to this type of federal license can be long and tough, he said that the “pace at which these applications move will be telling and could set the tone for how quickly the U.S. banking framework adapts to digital finance.”