Zerohash, a crypto infrastructure provider for high-profile firms including Morgan Stanley's ETrade, failed to receive approval in its initial application to join the ranks of new digital asset-focused U.S. trust banks. According to reports from CoinDesk, the U.S. Office of the Comptroller of the Currency returned the company's application on July 17, indicating the regulator determined it had 'material deficiencies'. This administrative process means the charter bid is over, but not formally denied, as the OCC typically returns applications when they lack necessary information on company finances or officers.
As reported by CoinDesk, Zerohash indicated it plans to re-apply by the end of the month with a narrower scope that it expects will receive quicker review. The company stated that the initial OCC application may have been too ambitious in scope, covering 'a wide range of digital asset and fiduciary services.' The firm expects its next effort will take a more 'sequenced' approach, starting with an application for 'a more focused approval of national trust activities aligned with our intended rollout timeline.' The company emphasized that this administrative process allows them to refile and that it does not affect current operations under existing regulatory approvals.
The OCC's recent announcement on August 11 formalizes a major shift in how crypto firms can access federal oversight, with Comptroller Jonathan Gould stating that 'entities that engage in legally permissible activities, including those involving digital assets and other novel technologies, should have a path to becoming a national bank.' According to BigGo Finance, the agency has received 40 de novo charter applications over the past 18 months and has decided many complete applications within 120 days. The regulator has conditionally approved or received applications from Circle Internet Group, Ripple, Paxos Trust, BitGo, Fidelity Digital Assets, Crypto.com, Payoneer, and now Zerohash in under one hundred days. The Independent Community Bankers of America filed an objection in April, noting that this pace 'precludes deliberate, transparent policymaking.' Zerohash had been pursuing further investment at a potential valuation above $1.5 billion before its application was returned.
As reported by CoinDesk, Zerohash is already a state-chartered trust bank and a person familiar with its operations confirmed that its business with E*Trade doesn't depend on getting a federal charter. The company has powered crypto infrastructure at major businesses including BlackRock, Franklin Templeton, Stripe, Interactive Brokers, and DraftKings. However, the firm has been quietly battling in court against its former chief compliance officer, Edgar Guerra, who claimed in a California lawsuit that he was fired to mask compliance issues he'd uncovered. Guerra indicated his staff internally identified more than 200 significant compliance gaps, including in money-laundering controls.
