Morgan Stanley's infrastructure partner Zerohash rebuffed in pitch to be U.S. trust bank
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Summary
Zerohash, a crypto infrastructure provider used by firms including Morgan Stanley’s E*Trade, failed to secure approval from the U.S. Office of the Comptroller of the Currency (OCC) to become a national trust bank focused on digital assets. The OCC returned Zerohash’s application due to "material deficiencies," ending this charter bid but not formally denying it. Zerohash plans to reapply with a narrower scope and hopes for a quicker review.
Why it matters
The development highlights the OCC’s ongoing evaluation of digital asset-focused trust bank applications amid a surge of such charter bids. As the U.S. regulatory framework for stablecoins and crypto banks evolves, the OCC’s treatment of applications like Zerohash’s affects the pace and nature of federally regulated crypto banking in the U.S.
Key context
The OCC has recently granted many provisional charters to crypto trust banks after passing the Guiding and Establishing National Innovation for U.S. Stablecoins Act, creating a legal path for stablecoin issuers. Zerohash’s returned application contrasts with outright denials received by other firms. The OCC returns filings lacking sufficient information or responses, which means the application process can resume. Zerohash already operates a state-chartered trust bank and provides crypto infrastructure to major financial firms.
Key numbers and entities
Key entities include Zerohash, Morgan Stanley’s E*Trade, the OCC led by Comptroller Jonathan Gould, and competitors like Circle Internet Group, Ripple, and Paxos Trust. No specific figures are provided apart from a potential Zerohash valuation mentioned in May above $1.5 billion, though linked to an earlier application stage.
What remains unclear
The OCC has not publicly disclosed the precise reasons for returning Zerohash’s application or whether the ongoing legal dispute involving Zerohash’s former chief compliance officer influenced the decision. The company did not voluntarily withdraw and plans to resubmit but details of the modifications to its application remain unspecified. The OCC and Morgan Stanley declined to comment, leaving some procedural and substantive aspects uncertain.