Financial technology companies and cryptocurrency firms are showing interest in becoming state or national banks in order to expand their operations in the current administration, which they perceive as being more supportive of the industry. This move is seen as an opportunity to obtain licenses that were previously difficult to secure from regulators.

There is a noticeable uptick in discussions and preparations for obtaining bank charters, although it remains to be seen how many companies will actually go through with the process. While becoming a bank entails more regulatory scrutiny, it can lead to lower costs of capital and operational expenses in certain situations. Additionally, being licensed as a bank can enhance a firm's credibility with customers, paving the way for increased business and market opportunities.

Furthermore, obtaining a charter can allow companies to reduce borrowing costs by utilizing deposits, providing a significant advantage. The establishment of new banks is also expected to enhance competition within the industry and cater to specific customer segments or geographical areas, as suggested by industry insiders and analysts.

The shift towards seeking bank charters follows a decrease in the number of new charters issued by U.S. regulators since the financial crisis, with only four applications approved in 2023, as per S&P Global data. Given the anticipation of heightened regulatory scrutiny on online firms, seeking a charter can enable these companies to proactively address regulatory concerns, enhance their credibility, and access capital at a reduced cost.

Historically, the approval process for bank charters has been protracted, with an average of only five new charter applications approved annually between 2010 and 2023, compared to 144 approvals per year between 2000 and 2007. Regulatory lawyers have highlighted the need for streamlining this process to facilitate smoother approvals and avoid delays or withdrawals by applicants.