In February 2021, the Office of the Comptroller of the Currency—a U.S. Treasury bureau tasked with overseeing federal banking—granted conditional approval for the application of Washington-based Protego Trust Company to convert into a national trust bank.
After the OCC extended its conditional approval once, until Feb. 4, 2023, a spokesperson told Coins2Day on Friday that Protego didn’t meet its pre-conversion requirements, meaning its conditional approval expired.
The failure of Protego’s conversion to become a federally chartered bank, which would have allowed it to custody digital assets and grant it other credentialing privileges, is another setback for the crypto industry’s banking aspirations in the United States.
Currently, Anchorage Digital is the only crypto firm to have received a national banking charter from the OCC, and Wyoming-based Custodia was denied membership to the Federal Reserve system in January.
Protego and another firm in the process of applying for an OCC national bank trust charter, Paxos, were the subject of rumors following the Fed’s rejection of Custodia, with speculation that the OCC would follow suit.
In early February, Protego’s founder and executive chair, Greg Gilman, described it as “categorically untrue” that Protego had been asked to withdraw its application by the OCC, and sources familiar with the matter told Coins2Day they didn’t believe Paxos had been asked to withdraw its application—or been denied.
“Paxos continues to work constructively with the OCC,” a Paxos spokesperson told Coins2Day. An OCC spokesperson said that it does not comment on pending applications.
The situation is more complicated with Protego.
As part of its conditional approval, Protego had financing requirements—a combined $54 million in tier 1 capital and liquidity, in addition to adequate operation capital, Coins2Day has learned—that it had to secure prior to operation.
“[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,” the OCC spokesperson told Coins2Day.
According to a person with direct knowledge of the matter, Protego had signed definitive agreements for investment in excess of that amount, which it submitted to the OCC on Feb. 3—the day before its conditional approval was set to expire—as part of a certificate of completion. The next day, the OCC informed Protego that it was not yet authorized to operate as a national trust bank, meaning it did not have an opening date. As part of this communication, the OCC did not tell Protego that the firm had failed to meet the conditional approval requirements.
On March 1, CoinDesk reported that Protego had laid off more than half of its workforce but that its charter was still in play.
On Friday, the OCC released its weekly bulletin with an addendum that Protego’s time had expired for a conversion—the first public acknowledgment of the application—which an OCC spokesperson confirmed to Coins2Day.
In a phone call with Coins2Day, Gilman said Protego now has two potential paths. The first is to meet the requirement with its chartering authority in its home state of Washington to operate as a state bank. The second would be reapplying with the OCC, especially because in Gilman’s view Protego has met its capital requirements.
The expiration of Protego’s application still represents another significant setback for the crypto industry in the U.S. Last week, two of the main U.S. Crypto-friendly banks collapsed, with Silvergate announcing it would voluntarily liquidate and New York regulators taking control of Signature.
The OCC appears to also be closing its doors to crypto firms. Under the Trump administration’s acting comptroller, Brian Brooks, the agency oversaw conditional approvals of several companies. His successor, Michael Hsu, reversed course, indicating he would roll back pro-crypto policies and ordering a review of the agency’s actions.
