Block Crypto Bank will soon materialize as Block, the fintech firm formed by Jack Dorsey and Jim McKelvey, aims to get regulatory approval to form Builders Bank & Trust, N.A. The planned national trust bank will offer custodial services and other fiduciary functions for digital assets such as Bitcoin and stablecoins.
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The move will potentially allow Block to participate more in the burgeoning digital asset custody industry under federal regulation.
Block has submitted to the OCC in the U.S. for approval for the project to commence. Upon approval, the bank will be established on a trust bank charter. This is set to ensure that Block has a uniform federal framework within which it can engage in custody services, as it develops other crypto-related financial services.
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Block Crypto Bank Targets Digital Asset Custody
The suggested Block Crypto Bank would primarily concentrate on providing custody and fiduciary services instead of banking services. According to Block, Builders Bank would be an uninsured, non-bank. In other words, it would not accept any deposits from customers and would not offer FDIC-insured deposit services.
Bitcoin and stablecoins would be some of the digital assets offered by the proposed bank. Custody of digital assets is an option through which customers can manage their assets in a regulated institution. It may be very useful for firms that need custody of their cryptocurrency.
According to Block, the charter of the national trust would give it a consistent federal structure, in the sense that it would not build its operations based on state requirements, but rather on federal regulation of its bank operations.
Lee Woolley to Lead Block Crypto Bank
It is anticipated that Lee Woolley, who is the digital assets strategy head for Block, will be heading Block Crypto Bank if the OCC grants its approval to Block’s plan. Mr. Woolley has over two decades of banking and financial services experience.
His experience is in both banking and finance, and in Block’s increased interest in digital assets. The firm thinks that this experience can enable Builders Bank to offer products that suit customers from the cryptocurrency space.
Woolley stated that it is this background of Block in digital assets, the background that it has in Square Financial Services, and the banking skills of its team that have made the proposed bank very strong. Woolley further noted that Builders Bank was meant to assist Block in achieving its broader vision.
Block Builds on Existing Financial Experience
The suggested Block Crypto Bank would not be Block’s first attempt to operate in regulated financial services. Through Square Financial Services, Block has already gained some experience of working within the realm of finance.
At the same time, Block continues researching opportunities related to digital assets. Bitcoin continues to play a significant role in cryptocurrency strategies of the firm, whereas stablecoins have received more and more attention from financial organizations due to the prospects of blockchain payments and settlements.
With a national trust bank charter, it seems that Block is positioning itself for an expanded custodial service of digital assets. Such an arrangement can enable Block to grow its offerings under the oversight of a federal bank regulator.
OCC Approval Remains a Key Step
The Block Crypto Bank project cannot proceed to implementation until it is reviewed by the OCC and approved. It will examine the request and decide if Builders Bank satisfies the criteria for a national trust bank charter.
The institution will still be different from an ordinary commercial bank since it will not have deposit insurance and will not accept deposits. Its key activities will consist of custody, fiduciary activities, and other allowed trust activities.
With the approval of Block Crypto Bank, the entity could serve as one of the key components of Block’s digital assets plan. In other words, the bank would provide Block with a federal supervision framework with regard to Bitcoin and stablecoin custody, which would help it use its expertise in financial services.
Concerning the whole crypto space, the application is another step taken by fintech players towards regulated banks to incorporate digital asset services into their offerings. Thus, the decision on the final result of the process remains at the discretion of the OCC.
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