Figure Technologies has applied for a national bank charter to simplify its compliance requirements
- Blockchain alt lender Figure Technologies has applied for a national bank charter with the Office of the Comptroller of the Currency.
- This move highlights the growing maturity of the blockchain sector.
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The US-based alt lender, which uses blockchain to process home equity loans, has applied for a national bank charter with the Office of the Comptroller of the Currency (OCC), per Bloomberg. Figure had originally planned back in December—on the heels of a $103 million raise—to offer banking products with the help of partner banks. Launched in 2018, it has originated more than $1 billion in home equity lines of credit.
A bank charter would help Figure distribute its expanding blockchain-powered product suite nationwide. Figure initially offered a fixed-rate home equity loan product, allowing customers to borrow against the equity in their homes. Data from a customer's loan application is stored and shared on a blockchain, enabling the startup to approve home equity loans in as little as 5 minutes, while funding can be released within five days compared with the two- to four week process traditionally required by lenders.
The alt lender has since expanded the use of blockchain to other products, including a mortgage refinance option and an asset management platform, and plans to launch a small-dollar installment-loan offering in January. However, these products require licensing in each state Figure operates in, making it costly and difficult to expand.
Currently, Figure has to comply with 96 licenses from 49 states to operate its business, which could rise to 200 by next year, per co-founder and CEO Mike Cagney. By contrast, a national bank charter would enable Figure to offer its products nationwide while focusing on the requirements of a single regulator, simplifying its compliance efforts.
We expect Figure to succeed in securing a charter thanks to a fintech-friendly regulator, and its application underscores the evolution of blockchain players. The OCC just issued preliminary, conditional approval to SoFi—another alt lender, albeit not a blockchain-based one—which filed a bank charter application in July.
The regulator is also currently fighting a legal battle to prove its authority to launch a fintech-specific bank charter and recently gave national banks the go-ahead to custody cryptos. These actions suggest it will be open to granting Figure a license. Figure's application follows other startups looking to bring more blockchain-based financial services products into the mainstream via licensing.
In September, crypto exchange Kraken received a state bank charter in Wyoming to add a digital-asset debit card and savings accounts. And Coinbase is looking to expand its Bitcoin-backed loans to additional states beyond the 17 it's currently licensed in. We will likely see more blockchain startups seek licenses in the coming months to strengthen their competitiveness.
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