The OCC's 376-page proposed rule under the GENIUS Act is converting stablecoin policy into binding compliance requirements with formal issuer categories. Paxos, BitGo, and Ripple all received OCC trust charter approvals, but a trust charter does not guarantee Fed payment rail access. Klarivis data shows deposit movement from stablecoin-adjacent products is already measurable at community banks. The 26-month application timeline puts anyone starting today against a potential administration change, and sponsor bank programs face new pressure from charter competition and yield-based products.

Bank charter confusion, trust charter risks, and Fed Master Account access gaps are creating real problems for fintech operators, sponsor banks, and community bank executives right now. Tedd Huff, CEO of fintech advisory firm Voalyre and founder of Fintech Confidential, and co-host Steve Bishop sit down on Inside the Vault with three former and current regulatory insiders: Syed Raza, former Acting Chief Innovation Officer at the OCC and Managing Director at FTI Consulting; Michele Alt, Co-Founder and Managing Director at Klaros Group; and Ian Moloney, Chief Policy Officer at the American Fintech Council.

Find out more

1️⃣ Answer four questions before filing: who grants the charter, what powers it includes, what activities are limited, and who examines the institution.

2️⃣ Start compliance documentation now; controls, funds flow maps, and exception handling should be ready before the examiner asks.

3️⃣ Read the conditions attached to charter approvals; those conditions reveal what regulators did not trust in the application.

4️⃣ Align cost sharing, control ownership, and data ownership with your partner before examination forces the conversation.

5️⃣ Price the M&A path into your charter strategy; the 26-month timeline means the political window may close before your application clears.

Guest Links

Syed Raza

FTI Consulting

Michele Alt

Klaros Group

Ian Moloney

American Fintech Council

Steve Bishop

Fintech Confidential

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About the Guests

Syed Raza is a Managing Director at FTI Consulting with over 30 years in risk management and regulatory compliance. He previously served as Acting Chief Innovation Officer at the OCC, guiding regulatory policy for fintech licensing.

Michele Alt is Co-Founder and Managing Director at Klaros Group. She spent 22 years in the OCC Law Department and advises banks and fintechs on charter applications, regulatory strategy, and bank design.

Ian Moloney is Chief Policy Officer at the American Fintech Council. He previously led policy and regulatory affairs at Cross River and served as a Senior Analyst at the U.S. Government Accountability Office.

About the Co-Host

Steve Bishop is Founder and Chief Ally at amBaaSsador, an education and advisory platform focused on embedded finance and Banking-as-a-Service for financial institutions.

About the Host

Tedd Huff, CEO of fintech advisory firm Voalyre and host of Fintech Confidential. Fintech Confidential is a production of DD3 Media, bringing you the people, tech, and companies that change how you pay and get paid.

Chapters

00:00 Episode Highlights

00:36 Welcome to Fintech Confidential

03:31 Sky Flow: Building Fast and Secure (Sponsor)

04:33 What a Charter Means

07:06 OCC Rules and Stablecoins

09:43 Why Trust Charters Boom

13:50 Under.io: AI-Powered Onboarding & Risk Verification (Sponsor)

14:20 Fed Master Account Gap

17:59 Sponsor Banking Under Pressure

22:15 What to Watch Next

25:28 Action Steps and Wrap

27:50 Hawk.ai: AI-Driven Financial Crime Detection (Sponsor)

28:36 Disclaimer

#bankcharter #trustcharter #fintech #occ #stablecoin #geniusact #fedmasteraccount #sponsorbank #baas #fintechregulation #communitybank #bankingcompliance #fintechpolicy #occcharter #depositinsurance #stablecoinyield #bankholding

The bank charter now represents what it always

has represented, which is the keys to the financial kingdom.

Getting the charter and getting all the approvals and opening

your door is really the day one.

The real challenge starts after that.

The forward-leaning

Ian P. Moloney: quality of the current administration has not been

matched by other administrations.

The potential that a new Democratic administration may return to that,

that previous, uh, status quo.

These banks

Ian P. Moloney: are like the dogs

who

Ian P. Moloney: bought the car.

" Michele Alt: Okay, do we know how to drive it?

We're dogs."

This is Inside the Vault.

I'm Ted Huff, here with Steve Bishop.

Let's talk about what bank charter actually means and what it doesn't.

Welcome to Fintech Confidential, bringing you the people, tech, and companies

that change how you pay and get paid.

Welcome to Inside the Vault.

I'm Ted Huff, the CEO of Fintech advisory firm Volere.

Today I'm joined by Fintech Confidential informant Steve Bishop, and we're talking

about bank charters today, specifically why so many people are confused about

them right now, and why that confusion is starting to cost real money.

And Ted, you've been watching this play out

for a while now at Volere.

What made you want to do a full episode on it?

Well, honestly, it's, it's the phone calls.

Founders who just announced a charter application, bank executives trying

to figure out what a competitor's trust charter actually means for

them, board members who got a briefing and still couldn't explain what

their company had actually done.

And honestly, the word charter is doing a lot of heavy lifting right now, and

it's not always earning all of it.

And we've brought some serious people to help unpack it.

We have Syed Raza, who is a chief innovation officer at the OCC

before joining FGI Consulting.

You know, he's seen how these decisions look from the

inside the regulator's office.

We did.

We also talked to Michelle Ault at the Claros Group, former OCC who

now advises management teams on exactly these structural choices.

And Ian Maloney at the American Fintech Council, who works

with Fintech companies and their bank partners on the Hill, translating

what these regulatory shifts mean for how the programs actually operate.

Three different vantage points on the same set of questions.

And I will say a lot of what we're gonna cover today is stuff I've been

hearing in conversations that don't actually make it to a public panel.

That's kind of the whole point of what I do.

These are questions boards and examiners are asking when the cameras are off, and

a lot of the time the answers are not as clean as a press release make them sound.

Let's be honest, that gap is costing some teams real money right now.

Right, and, and what's really interesting is where our featured

guest agreed- And where they didn't.

We're gonna work through all of this, what a bank charter actually is, why

trust charters are everywhere right now, the Fed master account gap, which

is the place most people are really not talking about, and not only that,

but what all of this means for sponsor banking, and last but not least, what

to watch over the next six to 12 months.

So let's get started with something that, well, sounds pretty

basic, but turns out not to be.

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Ted, when someone says their company is getting a bank

charter, what are they actually saying?

Well, they may be saying about seven different things all at the same

time, and well, that, that's the problem.

A bank charter is the legal authorization to operate as a financial institution

under specific regulatory authority.

It really just defines who approved you, what you can do,

and who gets to examine you.

And the last part, that's one that matters most and generally gets

the least amount of attention.

The OCC charters national banks and federal savings associations, state

banking regulators charter state banks, and whether the Federal Reserve

or the FDIC layers on top of that really depends on status and where the

institution carries deposit insurance.

You can end up chartered in one place and examined by three different agencies.

So when a fintech announces a charter, that announcement

tells you almost nothing on its own.

Well, that's right, Steve.

Uh, you could be a national bank, a state bank, a federal savings association,

industrial loan company, a trust bank, a national trust bank- None of these

things are the same, and saying we got a charter without naming the type

leaves out the part that really matters.

The thing that stands out to me from conversations I've been

having is founders are treating the, the charter announcement as a finish line.

I've had a founder tell me that a board celebrated when

they had the, the announcement.

If that examiner is gonna ask about VSA staffing day one, what do you think a bank

charter actually represents, especially right now, and, and how has that changed?

There are two schools of thought in chartering process.

There's old school who saw the chartering window closed for many, many years.

They think it's going to be extremely difficult to go through

the national charter process.

Uh, the other school of thought is mostly new organization,

technology, fintech, digital assets.

They actually think it's very easy to get a national charter, and they think

it's much easier than it actually is.

Getting the charter and getting all the approvals and opening

your door, per se, the day one for the bank is really the day one.

Real challenge starts after that.

Yeah, that's a useful reminder that this is not just a label.

The real operating consequences depend on which box you're operating in.

And people are not always reading the fine print on

which box they're applying for, and that's where the OCC's recent

activity really gets interesting.

Because the OCC just issued a 376-page proposed rule to implement

the Genius Act, what it does is create formal issuer categories.

Once those categories exist, firms start positioning for the

one they think serves them best.

The headline is a proposed rule.

The practical implication is that stablecoin policy is starting to

become operating requirements.

And who is the issuer?

Who supervises it?

What backs it?

How does redemption work?

And who can prove the controls?

These really aren't even product questions anymore.

They're compliance questions.

So what should an operator actually take away from that?

Well, I mean, really there are four questions, right?

So who grants the charter?

What powers come with it?

What activities are limited?

Who examines the institution?

And if a management team can't answer all four of those, they're not really done

thinking about their charter strategy yet.

So where do you think the biggest gaps are between what people

believe about the chartering process and what it actually involves?

Think of applying for a bank charter as about as much fun as

a financial and emotional colonoscopy.

If you're thinking that they can do it quickly and painlessly and have an easy

ride, ah, you got another thing coming.

Still a big lift.

So what does, uh, the current regulatory activity tell

you about where oversight is headed?

Ian P. Moloney: The current regulatory activity shows that there's an opportunity

to allow bank managers to manage and to engage in their activities, whether it be

fintech companies or stablecoin providers.

There's a real opportunity within that chartering conversation, whether

it be limited purpose or, you know, more broadly for a national bank

charter.

So the OCC has drawn some lines.

What we're seeing is firms racing to get on the right side

of those lines before the final rule makes the entry cost higher.

if you can't answer those four questions about your own program

right now, you're not ready for the conversation your bank partner or your

examiner is going to have with you.

And most visible move right now is trust charters.

Yeah.

Paxos, BitGo, Ripple, all OCC trust charter approvals

in a pretty short window.

What's actually going on there?

Steve, it's, it's positioning.

Firms are trying to get into federal supervisory structure before the markets

get more defined, before the final rules make the entry cost even higher.

That is strategic logic.

The timing is definitely not accidental, and what's most important

to understand is that a national trust bank charter is not a full charter.

It can put a company inside of the federal supervisory framework.

It can support custody activities, certain payment functions, and even

stablecoin positioning for them.

It doesn't make them a community bank, no insured deposits, no lending

authority, and it still brings real examination expectations, governance

requirements, capital considerations, and compliance obligations.

So if I'm a fintech founder reading one of those headlines

and thinking we should do that next- What's the one thing you want them to slow

down on before the application goes in?

What is your read on why trust charters have

gotten so much attention lately?

Because it serves a very specific purpose for organizations who

are only interested in custody services.

Crypto wallet, crypto exchanges, and the capital requirements for trust banks

are a little bit lower than a full bank.

For them, it gives them the regulatory fiduciary authority to get involved in

that business, but they are not interested in maintaining deposit accounts or loans.

They are not interested in, uh, of- offering traditional

deposit accounts or loans.

What are firms actually missing when they go through this process?

Well, getting a trust charter is just the start

of the work, not the finish.

The regulators' expectations don't wait for the press release to clear.

I wanna push on you slightly there.

Uh, there's a counterargument that I keep hearing.

A trust charter creates real credibility with bank partners

and institutional investors even before the exam gets serious.

Is that wrong or, or just incomplete?

A trust company, although it is a bank for purposes of state

and federal law, and therefore is not subject to all sorts of individual state

and local licensing requirements, it is not considered a bank for purposes

of the Bank Holding Company Act.

So that means you get the benefit to be a bank and conduct your

activities nationwide, but you're not, uh, subjecting your parent to

Bank Holding Company Act supervision.

It's huge, but here's the trade-off.

Conditional approval for some applicants is it makes it a lot

easier for them to raise money.

But not everybody's Coinbase.

Ian P. Moloney: What tends to get overlooked is the need for good timing

on the charter application to make sure that you get in within this

administration as opposed to a potential next administration, which may be less

favorable in the chartering space.

That Bank Holding Company Act piece is one I'd not fully appreciated

till I started having these conversations.

A trust charter gives you the bank benefits without pulling your entire

parent company into Fed supervision, and most of the founders I talk to have

no idea that trade-off even exists.

And the part that does not make the press release is the one that

may matter most operationally.

Right, and the one that matters a lot more than people seem to

realize is the headline says approved.

The operating reality says the, you may still need some infrastructure you needed

before the announcement even happened.

So getting a trust charter and getting direct access to Federal Reserve payment

rails are Two completely different things.

Hey, Ted Huff here.

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Ted, walk us through what a Fed master account

actually is and why it matters here.

A Fed master account is a direct account at the Federal Reserve.

It gives an institution access to FedWire, FedNow, and the core

payment infrastructure of the United States financial system.

If you have one, you can move money directly across those rails, and if you

don't have one, you need an intermediary bank or a sponsor bank to do that for you.

So... And a trust charter doesn't automatically come with one?

It doesn't.

A trust charter may make a firm eligible to apply for

a master account, then the Fed decides whether to approve it or not.

The Tenth Circuit confirmed late in 2025 that the Fed has full

discretion here, and even when an applicant is legally eligible.

The first limited purpose payment account of that kind was approved in March of

2026, and before that, the firms holding trust charters but without master account

were still routing through partner banks to reach the Fed payment rails.

Okay, so the charter changed the supervisor relationship,

but the operating dependency on a partner bank may still be exactly

what it was before the charter.

Yeah, and that's the gap.

And it appears to be the same thing most management teams have not

fully priced in when they treat a charter approval as the finish line.

So a trust charter gives the firm eligibility to

apply for a Fed master account.

Doesn't guarantee one though.

How significant is that gap, or what does it mean for those counting on Fed payments

as part of their, their payment strategy?

Don't go with a limited purpose charter if it's an absolute

must to have a master account.

That's too big a risk because there are no guarantees.

I would say they have a choice.

Either proceed now with a full service bank application, or

they could wait a little bit.

We need to wait and see how it shakes out.

The shorter version, institutions without deposit

insurance sit in a higher scrutiny tier, which means longer timelines

and no guarantee at the end.

You know what I keep hearing from operators that have

gone through this process is timeline assumptions going in were way off,

and, and not just by a week or two.

One operator I talked to had an 18-month product roadmap built

that required FedRail access.

They're now well into that window, but the roadmap hasn't moved.

A trust charter makes a firm eligible for a FedMaster

account, but it doesn't guarantee one.

How significant do you feel the gap is, and what it means for firms

counting on Fed payment access as part of their primary strategy?

So I think because of all the developments recently with implementation

of Genius Act, there's a very good chance that they will have that access.

I have not heard anything otherwise.

I think it's a very high probability of, of and likelihood of people having

access to FedMaster account if they have a federally chartered banking organization.

Ian P. Moloney: So the current gap between getting a charter and

getting a FedMaster account is a fair size under the current regime.

However, it has every sign of shrinking directional cues of Governor

Waller, as well as the administration to a broader range of entities.

So which means everything we're about to talk about still applies.

Steve, that is exactly right.

The charter changes the supervision picture.

It doesn't necessarily change the operating picture.

And the sponsor bank conversation is where this gets very real for

a lot of people in this audience.

So why don't we go ahead and,

uh, go there?

Let's say you're a community bank or a fintech running a sponsor

bank program, no trust charter, no OCC application in the works.

Why does any of this matter to you right now?

See, because the charter conversation and the stablecoin

yield conversation are heading toward the programs, whether

they're positioned for it or not.

And if a fintech partner gets a charter or starts competing with

financial institutions with yield, the structure of the existing programs at

the sponsor banks really get tested.

Sponsor banking works on a clear division of roles.

The bank holds the regulatory accountability, and the fintech

holds the customer relationship.

Well, and what's changing is that some of the fintechs are now

pursuing the charter, specifically to remove that bank from the equation.

And in the meantime, stablecoin yield is starting to compete

directly with deposit-funded products at the same community banks

running those exact same programs.

The Claravis data suggests deposit movement from

stablecoin-adjacent products is already underway at community banks.

That is not a future risk, it's a current one.

How do you think the sponsor bank model is holding

up under current pressure and- Where do you see it straining?

Ian P. Moloney: I think generally the sponsor bank

model is holding up quite well.

Bank fintech partnerships rely upon ability for banks and fintech companies

to leverage their core competencies, and so many fintechs will continue

to do that, and that will never lead to a, a charter conversation.

The yield question is where charter strategy and

deposit competition converge in the most, most uncomfortable way.

A firm with a trust charter and a stablecoin product

can offer something that looks like yield without carrying deposit

insurance, CRA obligations, or the capital requirements a bank carries.

Ted, how should a community bank think about that?

Well, the honest answer is that a product paying something that

looks like interest on customer balances, well, Steve, you know, it's gonna draw

scrutiny regardless of what it's called, and banks will flag this competitive gap.

Regulators will ask who's accountable when something goes wrong, and the

charter type depends on the answer to that question, which is exactly why it matters.

What are the banks and fintechs getting wrong about their shared

responsibilities in these programs?

Both the sponsor banks and the fintechs are misaligned when it

comes to cost sharing, uh, control ownership, uh, and data ownership.

How do you think the sponsor banking model we know today is holding

up under the current pressures, and where do you see it straining the most?

I was talking with one of my partners, Seth Ross, about this just

this morning, and he had a good line.

He said, "It's not dead. Sloppy BaaS is dead," Seth, so shout out to Seth.

Accountability and accurate reconciliation are absolute musts.

So for the sponsor bank that's still in the model, not chasing

a charter, not competing on yield yet, what is the one test that tells you

whether your program is actually well-ran?

Steve, one question.

If an examiner walked in today and asked you to walk through the program from

customer onboarding to funds movement to exceptions to shutdown, could you do

it without calling three vendors first?

If the answer is no, that is the work that needs to happen.

The program documentation, the controls, the oversight structure, that is what

gets examined, not the term sheet.

The programs that are gonna hold up are the ones where both

parties can answer examiners' questions without calling three vendors first.

If you can't do that today, then that is the work.

We've covered what a charter is and why trust charters are

attracting so much attention.

Let's talk about what to actually watch.

The thing I'm watching most closely is not the approvals

It's the conditions attached to them, because a conditional

charter approval tells you what the regulator saw in the applications.

The conditions tell you what they did not trust yet.

The firms that close that gap really quickly will be in a completely

different position than the ones that are still working on it

when the pre-opening exam lands.

What are the, the one or two things you are watching most closely right now?

I am really closely watching the organizations that were

given conditional approval to see how they will fare with pre-opening

exam and the opening process.

Secondly, community banks' profit margin model, uh, because as fintechs are coming

into very low on overhead, very high on efficiency, so their profit margins are

going to be much higher in the banking service as compared to traditional banks.

Uh, that will add a lot of pressure to traditional banks.

The thing that

I keep watching is the enforcement gap on the compliance side, s-

specifically operators who built programs assuming someone downstream handled

the AML and the, the sanctions picture.

The piece I think that is underpriced is the conversation at

the state level and that activity.

Federal charters and federal preemption gets most of the attention though,

but consumer protection laws sit heavily at the state level and are

not preempted by the federal law.

A fintech operating under a sponsoring model is still

reachable by states that can't regulate that bank directly.

That's where the next wave of enforcement pressure is likely to come from.

A bunch of conversations that we've been having are, "Don't do de novo

if you really need a Fed, Fed account. Go find a financial institution you can

acquire that already has a master account and acquire them." Or, and you kinda hit

on it, is, is wait to see what happens, especially after Kraken getting their Fed

master account through their Wyoming LLC.

What are your thoughts on those options that I've been hearing?

Preparing a decent application takes about four months, at

least four months for the regulators to approve it, and then you've 18 months

to build it and get final approval.

If you add up that math, you're getting right up and against the

next presidential administration.

Given the timeline, where you are in your thinking- Mm-hmm ... you

might wanna be thinking about M&A.

So the through line is that the gap between announcement

and operating reality is where the real risk actually lives.

And now, most firms are closer to the announcement than they are to the reality

Ian P. Moloney: So what I'm personally watching most closely right now is

the chartering conversation, the conversation around true lender, and

then also no conversation would be complete without discussion of AI.

All right, last question.

What do you actually do before the final rules land?

There are three things that need to happen.

One is watch the final OCC rule for how stablecoin issuer

categories get conditioned.

The conditions matter way more than the approval.

And watch whether trust charter firms can convert this conditional approval

into a full charter before this really narrow political window closes.

Also, watch deposit movement at community banks and segments already

using wallets or yield products, because that pressure is already

showing itself present in the data.

For operators, don't wait to start your documentation work now.

Customer funds flow, legal authority, partner roles, controls, disclosures,

exception handling, uh, have it all ready before the examiner asks.

If someone were to come to you today and ask you what they should actually

do, not just what to watch and... What would you tell them to do?

If you're thinking about doing it, you better get cracking

because the clock is ticking.

That is a bank charter confusion episode.

A charter is a supervisory relationship.

A trust charter, it's not a full bank charter.

Getting one doesn't mean Fed payment rail access, and sponsor

banks still need to understand what they are actually supporting.

Uh, special thanks to Syed, Michelle, and Ian, three

people with generally different views who are direct about all of it.

The thing that stayed with me is that the regulatory structure is often moving

faster than the operating structure.

The announcement is real, the readiness is still catching up.

So if you're building, sponsoring, or supervising one of

these programs, we're here to help.

And thanks for listening to Inside the Vault.

If this discussion got your attention today, there's much

more where that came from.

Head over to YouTube, Spotify, Apple Podcasts, or wherever

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Be sure to share this with someone who is serious about where fintech is going,

and as always, keep moving forward.

As we wrap up today's episode, I've got one last thing for you.

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