A spokesperson for the United States Office of the Comptroller of the Currency (OCC) told Fortune that the firm did not meet pre-conversion requirements. According to the spokesperson:
“[The] pre-conversion requirements included policies, procedures, systems and other measures to ensure the safe and sound operation of the bank as well as meeting minimum capital and liquidity requirements.”
Protego, based in Washington state, was granted an 18-month conditional charter in February 2021, and it was extended once. Under a conditional charter, an organization cannot accept deposits. An unnamed source told Fortune that Protego had lined up agreements on the necessary financing to meet charter requirements by the Feb. 4 deadline, but it did not receive a firm answer about its charter.
An OOC bulletin dated March 5–11 listed Protego and indicated that time had expired on its conversion on Feb. 4.
Related: 89% still trust centralized custodians despite 2022’s collapses: Survey
Protego founder and executive chair Greg Gilman told Fortune that he felt the company had met the financing requirement and the company could either reapply to the OCC, which is a division of the federal Treasury Department, or apply to state authorities to operate as a state bank.
SCOOP: The OCC says the crypto firm Protego did not meet the requirements to convert into a national trust bank, another massive setback for the crypto industry as its banking options dwindle:https://t.co/WdopSyOdZS
— Leo Schwartz (@leomschwartz) March 17, 2023
A federal charter would have allowed Protego to custody digital assets and perform credentialing functions, such as Know Your Customer measures. At present, Anchorage Bank is the only crypto firm to receive a national banking charter.
Custodia Bank was denied a place in the Federal Reserve System on Feb. 23. Paxos also received a conditional national trust bank charter in 2021. A spokesman said that the company “continues to work constructively with the OCC” on its pending application.
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