Coinbase receives preliminary approval from banking regulators for trust charter, enhancing custody efforts.

Coinbase’s provisional OCC approval brings it nearer to functioning as a federally regulated crypto custodian, subject to compliance and final assessment.

Key Points:

• Coinbase has been granted conditional approval by the Office of the Comptroller of the Currency for a national trust company charter, which is a significant advance toward becoming a federally regulated crypto custodian.
• This initial approval necessitates that Coinbase establish compliance systems, recruit essential personnel, undergo regulatory evaluations, and showcase effective risk management and anti-money-laundering measures prior to obtaining a complete charter.
• A finalized charter would enable Coinbase to operate as a non-insured national trust company concentrated on digital asset custody, bolstering its aim to create more consistent revenue from institutional clients beyond trading fees.

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Coinbase (COIN) announced on Thursday that it has obtained initial approval for a national trust company charter from the U.S. Office of the Comptroller of the Currency, as reported by Bloomberg, representing progress toward operating as a federally regulated crypto custodian.

This approval is not definitive. It is a conditional endorsement that outlines the criteria Coinbase needs to fulfill before it can acquire a full charter. These generally involve developing compliance systems, hiring critical personnel, and completing regulatory assessments. The OCC also requires firms to demonstrate their capability in managing risk, safeguarding client assets, and adhering to anti-money laundering regulations. Full approval can only be granted after these conditions are satisfied.

If the charter is finalized, it would permit Coinbase to function as a non-insured national trust company. This arrangement allows the firm to hold digital assets for clients but prohibits it from accepting deposits or issuing loans.

Coinbase initially submitted its charter application in October, alongside other companies including Ripple. Recently, Citadel-backed exchange EDX Markets has also indicated it filed for a similar structure. This influx of applications signals an increasing demand for regulated custody as substantial investors engage with cryptocurrency markets.

For institutional entities, custody prioritizes trust over trading. For instance, a pension fund may seek exposure to bitcoin but requires a regulated organization to securely hold the asset. A federal charter can offer that assurance in a manner that state licenses may not provide.

This initiative aligns with Coinbase’s strategy to become less dependent on trading fees, which can fluctuate with market conditions. Custody presents a more stable revenue stream. The company is already serving as a custodian for several U.S. spot bitcoin exchange-traded funds, managing the underlying assets on behalf of fund managers.

Coinbase has not yet responded to a request for comment.