OCC grants conditional approval to crypto bank OpenReserve

Core Points

The OCC has conditionally approved the OpenReserve Bank application.

Blockchain is at the core.

Deposit and loan business is planned.

stablecoins are part of the plan.

OpenReserve is not yet officially open.

OpenReserve is building crypto banks in different ways

On September 2, the Office of the Comptroller of the Currency (OCC) gave preliminary conditional approval to the proposed full-service National Bank, OpenReserve Bank, National Association in Salt Lake City, Utah. The application covers a wide range of banking services. OpenReserve plans to provide deposits, loans, payments, treasury services and digital asset products, and use blockchain-based systems as part of the bank's underlying infrastructure. This makes the company different from those that primarily seek licenses to provide crypto asset custody services.

As the recent wave of crypto banking licenses shows, custody has become one of the main ways for digital asset companies to enter the regulated financial sector. OpenReserve pursues a broader model that integrates banking services and blockchain settlements within the same institution. For companies, the potential benefits are reducing the number of independent systems used for capital flow, digital asset processing, and obtaining financing. Whether this advantage can be realized will depend on the bank's ability to execute once it is approved to operate.

OCC approval is only the beginning

The regulator's decision comes with an important qualification: the approval is only "preliminary" and "conditional". OpenReserve can continue to form the proposed bank, but it must complete a series of requirements before formally starting banking operations. The OCC said it expects to obtain federal deposit insurance from the Federal Deposit Insurance Corporation (FDIC) and apply to become a shareholder in Federal Reserve Bank.

Banks must also complete pre-opening work and undergo pre-opening inspections. These requirements are detailed in OCC's Corporate Decision No. 1389. Capital is another major requirement. OpenReserve must raise at least $210 million in initial paid-up capital after deducting organizational and pre-opening expenses. The OCC also requires banks to maintain a Tier 1 leverage ratio of at least 12% for the first three years of operations.

Technical and compliance controls are also part of the approval. OpenReserve must establish the required risk and compliance projects, document its final information system architecture, and complete independent security testing of its e-banking platform. As a result, the company still has a lot of work to do before customers can use the bank.

What OpenReserve plans to deploy within banks

OpenReserve's proposed business scope goes well beyond digital asset custody. Its public banking application describes deposit and loan products, including tokenized versions, as well as payments, treasury services and foreign agent banking. Digital asset offers will include untrusted custody, wallet custody and cryptocurrency custody. Customers can also use digital assets such as stablecoins to conduct certain remittance transactions.

A separate subsidiary will handle stablecoin business. Based on the OCC decision, OpenReserve plans to establish a wholly-owned subsidiary to issue, hold, convert and process payments involving U.S. dollar reserve-backed stablecoins. The OCC noted that at the time of its decision to issue the license, the subsidiary's application had not yet been submitted.

This combination makes the proposal look different. OpenReserve will have bank balance sheets while combining digital asset custody and blockchain-based settlements, rather than operating these activities as separate businesses.

What changes blockchain may bring

The value of this model ultimately depends on what customers can do with it. OpenReserve describes its concept as a "continuous bank" designed to provide financial services that operate 24/7. Its disclosure materials emphasize that tokenized deposits, digital vaults and asset-backed financing are part of the approach.

OpenReserve's description of the pattern provides more details on how these services work together. For corporate treasury teams, the attraction lies in practicality. Companies may deposit cash in one bank, hold digital assets at another provider, and arrange financing elsewhere. Moving between these systems may result in settlement delays and additional reconciliations. A shared blockchain ledger could reduce some of the friction by allowing certain assets and payment instructions to be settled without waiting for updates from multiple independent systems. This can be very useful when companies operate in different time zones or need to move collateral quickly. However, the technology still needs to prove its clear benefits. If the broader banking experience remains expensive, difficult or unreliable, a faster settlement channel means little to customers.

stablecoins can support the same system

The proposed stablecoin subsidiaries are consistent with this broader banking strategy. OpenReserve hopes to issue dollar-denominated stablecoins while also running a bank that also provides deposits, loans, payments and treasury services. The OCC has resolved the issue of National Bank's use of distributed ledger technology and stablecoins in allowed payment activities provided that applicable requirements are met.

The key question is how these functions will work together. Stable coins can process payments or transfers, while bank accounts, custody services or credit lines provide the surrounding financial relationships. In this setup, the token becomes an integral part of the banking service rather than the entire product. This trend is becoming increasingly clear across the industry. For example, SoFi launched a bank-issued stablecoin, an example of regulated financial institutions using public blockchain to issue dollar-denominated digital assets. OpenReserve proposes combining this type of payment infrastructure with a wider range of banks.

Blockchain banks still face regular banking risks

Using blockchain will not eliminate the basic responsibility of running a bank. OpenReserve needs controls that cover credit risk, cybersecurity, customer information, anti-money laundering rules and sanctions compliance. The conditions of the OCC specifically cover several of these areas. Regulators are also scrutinizing the technology itself. OpenReserve must provide a detailed description of its final information system architecture and a risk management plan. Before opening business, banks must complete independent testing of their e-banking platforms, including controls designed to prevent unauthorized access and other security threats.

The blockchain ledger is only part of the system. Customers will still interact with applications and APIs, while banks need identity controls, custodial procedures, and internal systems to handle errors or interruptions. If OpenReserve is to deliver on its promise of faster settlements, these systems must operate reliably.

Customer needs will determine whether the model is feasible

Banking licenses establish the regulatory framework, but they do not tell us whether companies will use the service. OpenReserve needs to demonstrate that its approach improves matters that customers already care about, such as settlement speed, treasury management, collateral flow or financing channels. Loans may be one of the clearest tests.

OCC confirmed that loans are one of the proposed bank's core businesses. Companies that can move collateral more quickly and use it in regulated credit relationships are likely to manage their liquidity more efficiently. This would prove the value of blockchain more than just showing that payments can be settled on-chain.

What OpenReserve must do

The next stage is to translate the approved plan into an operating institution:

• Final OCC approval: Banks must meet their pre-opening conditions.
• Deposit insurance: OpenReserve still needs to obtain the required FDIC approvals.
• Capital: Banks must meet the $210 million requirement set by the OCC.
• Technology: Its systems must pass regulatory and security reviews.
• Customers: Business models must prove their value in practice.

The approval also comes with a timetable. According to the OCC's decision, if OpenReserve does not raise the required capital within 12 months of the date of the initial conditional approval, or does not open for business within 18 months (subject to the extension terms in the decision), the approval will expire. Currently, the focus is on completing the regulatory and operational work needed to prepare the institution.

OpenReserve still needs to prove its philosophy

The OCC has provided OpenReserve with a path to becoming a National Bank, but the company still needs to complete the regulatory process and build the system described in its application. The bigger test comes after this: whether companies will actually use the bank's combination of traditional financial services and blockchain-based settlements because it solves the problem better than existing alternatives.

This article is for reference only and does not constitute investment advice.