ICYMI: The Banks of Tomorrow

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1:28Bloomberg Audio Studios, podcasts, radio, news. This is Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. Well, cryptocurrency companies, I'll try that again, are rushing to bridge the gap between mainstream finance and digital assets under the Trump administration. from stablecoin company circle going public to Emily, more and more so-called altcoins being offered in traditional exchange-traded funds. I know about that. That's like your thing, right? That's like my thing. Do you write about that, altcoins and ETFs? I do. I think he pitched this altcoin crypto ETF summer.

2:12I'm like, okay, we don't need to make these little. So I've heard of brat summer. Right. What is it again? What did you say? Crypto ETF summer. It doesn't have the same ring to it. It doesn't have the same. It doesn't roll off the tongue. No, it doesn't. What is the color associated with it? You know, Brad Summer, there was like the green. It was like lime green. I guess crypto would maybe be gold. I don't know, because it's digital gold. In any way, in the latest moves of this crypto to TradFi bridge the gap closing, payments and stable coin firm Ripple Labs and also crypto custodian BitGo have applied for national bank charters.

2:45Paige Smith, she's the Bloomberg News consumer finance reporter, joins us now in the Bloomberg Interactive Broker Studio. You wrote the story. Maybe we could just start with what are Ripple Labs and BitGo and why do they want bank charters? That is a great question, Emily. And I do think I agree. Let's not try to make Bitcoin or ETF summer happen, but it could be the summer. I campaign for bank charter summer. I think that's better. And it's just perfectly nerdy for my kind of beat. But it so as you said, Bicco and also Ripple, but there are a number of folks who want bank charters right now. It's fintech firms.

3:28It's cryptocurrency companies. It's automakers. It's this is just to step back for a second. This is not a new phenomenon. There have been companies that have been wanting to be banks that are not traditionally banks for a very long time. OK, this is what I don't understand. You've covered fintech companies. You do cover fintech companies. Chime, for example, doesn't want to be a bank, but they want to offer banking services. What's the delta here? What's the difference? So Chime is different because they make their money off of payments specifically. So every time you swipe your card, they make a fee off of that.

4:04And that is or tap your card, whatever. That is how they make their money. But if you make your money in that way, you have to work with a bank. And if you lend to anyone, you have to work with a bank in order to you, you know, Chime cannot officially accept deposits yourself. You have to work with a bank to accept. So I thought the reason that these fintechs don't want to be banks is because then they're regulated under a different set of rules also. That's correct. That's part of it. But if you apply to be a bank, you do have, as Emily said, you have more stability in the financial system. You can do other things that previously you wouldn't have had to, you would not have been able to do.

4:45And you don't have to rely on that third party. You just have more control over the situation. And it's changing because under the Trump administration, there's actually an appetite to essentially give these bank charters out. Under the Biden administration, that was not the case. There was no forward movement on the regulatory, on the regulatory landscape. you, even if you wanted to be a bank, your shots of becoming one were slim to not. So is this about the Trump administration being looser, more friendlier to the crypto industry, or is this bigger than that? This is the Trump administration just wanting to hand out more bank charters at large.

5:26I think that that is, it's a little bit early to say. We have seen a heck of a lot of applications. We haven't seen these applications approved just yet. We've seen some approved, but no, there's not enough information, I would say, to say, there's not enough information out there to say, yes, definitely, the Trump administration is, you know, totally okay with giving every crypto company that applies a bank charter. That's not the case yet. However, you can look at the other indications from the Trump administration's regulatory agenda to surmise that there are certainly there's certainly a lighter regulatory touch or a more welcoming approach, if you will, to cryptocurrency firms generally.

6:11In the United States, when you have money in a bank, you have an understanding that this money is protected by the Federal Deposit Insurance Corporation, the FDIC. Could we start to see some sort of guarantees on digital assets as a result of these bank charters? So it depends on the kind of bank charter that they're applying for. Not to be super nerdy, but I forget exactly which company it was, but one of the firms that have recently applied applied for a national bank charter, in which case you would also need to apply with the FDIC to get that kind of insurance. That is not the case for all kinds of bank charters.

6:52So, you know, some folks may apply for a sort of more narrow bank charter, sort of like an industrial loan charter as Nissan, for example, is applying for. So it would be from an automaker's perspective. It would more easily allow them to lend or hand out auto loans for their customers. They wouldn't have to work with a, you know, we'll pick on Ally for a second, an auto lender. But in terms of the, to go back to your original question, for digital assets being essentially guaranteed by the FDIC, I think it's a little bit early to see on that. What about I mean, I know it's it's very early in the stages of this potentially getting approved.

7:34But for Ripple and BitGo, for these crypto companies, have they said anything about like ideally what they would want to be able to do with the bank charter? Yes, there's extensive there's extensive there are extensive filings that sort of clarify exactly what they want. But again, I think it really is. It's sort of this sense of inertia, right? Like if they want to do this and this is on their strategy roadmap, now is the time to do it. This process takes time. What you wrote about and what you've been writing about are these not necessarily digital upstarts at this point, but they're not the incumbents by any means when it comes to digital asset companies or asset managers.

8:17We see these companies trying to become more traditional. Are we going to start seeing the big banks become holders of digital assets or start to serve and service this group of clients? We know what Jamie Dimon has said for years about Bitcoin. He's not a fan. I think that it is early in the stage and it's early in the game. And I wouldn't rule anything out at this moment in time. I mean, if you look at folks expressing interest in stable coins, for example, you've seen big banks express interest. You've seen big retailers. There have been reports of retailers expressing interest. I think there is a lot of runway here of sort of decentralized finance wanting to be more traditional, but also traditional finance wanting to be more decentralized and a little more hip and modern.

9:07That's very nerdy. Sorry. Hip and modern banking summer. There it is. I was waiting for that. Thank you, Emily. Thank you, Paige. Paige Smith, Bloomberg News Consumer Finance reporter. Check out her story and more on the Bloomberg Terminal, also at Bloomberg.com.

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