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Key insight: Block is applying for a new charter to offer crypto custody services after working with digital assets for years.
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What’s at stake: Fintechs are increasingly looking to own the bank regulation relationship directly instead of connecting to sponsor banks.
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Expert quote: “Block has not signaled tokenization plans and its stated digital asset focus remains bitcoin, with stablecoins adopted more reluctantly on customer demand.”
Block CEO Jack Dorsey, who has been bullish on crypto for years, is throwing his hat in the ring for a trust charter to offer custody for both bitcoin and stablecoins through his company.
Block announced after market close on Tuesday that it has submitted an application to the Office of the Comptroller of the Currency to establish a national trust bank called Builders Bank and Trust. The charter would be separate from the company’s <a href="https://www.americanbanker.com/news/squares-long-planned-bank-opens-for-business?utm_campaign=distributionpartner&utm_medium=referral&utm_source=yahoofinance” rel=”nofollow noopener” target=”_blank”>current ILC charter, which powers Square Financial Services.
The charter application is the latest in a series of requests from fintechs and traditional financial firms to the OCC for trust charters focused on managing digital assets. Block made its announcement on the same day Chime announced it would be acquiring one of its longtime sponsor banks for its charter.
Pending approval from regulators, Builders Bank and Trust would provide custody and related fiduciary services for digital assets such as bitcoin and stablecoins. According to a company statement, Builders would be an uninsured national trust bank and would not accept deposits or make loans.
“Block already self-custodies bitcoin in most cases, so the charter is likely primarily about federal preemption supporting better scale [with] growth at federal reg level vs. state-level patchwork,” Keybanc Capital Markets, or KBCM, analysts said in a research note. “Within the recent wave of digital asset trust applicants, Block stands out as a mass-consumer app with added distribution via its Square merchant base. The charter adds optionality across stablecoin settlement and other digital asset activities.”
Dorsey has previously expressed support for bitcoin and a dimmer view of stablecoins. However, the company has still supported both forms of digital assets in its products and is now including both in its trust bank business plan.
The company did not indicate that tokenized deposits are part of its proposed business plan, even as other digital-asset focused firms and banks are exploring tokenized deposits as a use case for digital asset infrastructure.
Source: finance.yahoo.com