Coinbase wins national trust charter, and strict OCC mandates apply

Coinbase National Trust Company’s federal custody charter is now effective, moving the exchange’s institutional custody expansion beyond preliminary approval.

The Office of the Comptroller of the Currency’s (OCC) application register records Nov. 6 as the effective date. A final conditional approval letter dated Nov. 6 says the bank met its preopening requirements and authorizes it to open on Nov. 9.

That gives the new entity permission to provide cryptocurrency custody under federal fiduciary supervision. The OCC has also approved an arrangement to transfer accounts from Coinbase’s New York trust company over time.

Coinbase announced final approval on Nov. 9, saying the charter would bring a consistent federal framework to its custody business. The milestone follows the April 2 preliminary decision.

Changes for Coinbase custody clients

The OCC’s final approval permits cryptocurrency custody in a fiduciary capacity. That subjects the national trust company’s custody services to fiduciary duties and standards of behavior.

The letter also discloses a Sept. 1 agreement between Coinbase Custody Trust Company and the new national bank providing for a gradual transition of custody-service rights and responsibilities from the New York trust company to the national trust company.

The OCC approved the acquisition and assumption of those accounts and assets under an exemption from certain restrictions on transactions between banks and affiliates.

That gives the planned transition regulatory authorization. The final letter describes an intention to begin migration, while Coinbase’s Nov. 9 announcement supplies no completed-transfer figures or client-by-client schedule.

The April plan envisioned moving the entire custody business over the national bank’s three-year initial operating period.

The November conditions supersede those imposed in April, and they keep the bank within trust-company operations and related activities in its business plan.

During its first three operating years, significant deviations require 60 days’ prior notice and written OCC non-objection. The final letter specifically includes material changes to products and services and any offering of transactional services for custody-account customers.

The bank must also maintain at least $60 million in tier 1 capital, prescribed liquid-asset buffers and a separate reserve covering 180 days of operating expenses during that period.

The April decision described an uninsured institution, and the final approval preserves the limited trust-company scope.