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Key Takeaways
- The OCC returned Zerohash’s national trust bank charter application on July 17, an administrative step distinct from a formal denial and without a stated reason.
- Zerohash says it will refile with a narrower, more sequenced set of trust activities and expects a swift review, though the OCC hasn’t confirmed any expedited timeline.
- Separately, Zerohash is contesting a lawsuit from its former chief compliance officer alleging he was fired to conceal more than 200 compliance gaps.
Zerohash, the crypto infrastructure firm that powers backend operations for Morgan Stanley’s E*Trade and several other major financial firms, failed to win approval for a national trust bank charter in its first attempt.
The Office of the Comptroller of the Currency returned the Chicago-based company’s application on July 17, according to public OCC filing records, a process distinct from a formal denial but one that ends the current bid without a stated reason.
An Administrative Return, Not a Formal Denial
The OCC’s move leaves Zerohash outside the growing group of firms that have received provisional trust bank charters focused on digital assets over the past year. Under OCC policy, a “return” signals the agency found the application materially deficient, distinct from a formal denial, which typically comes with a detailed public explanation of the reasons.
Two other fintech firms, Wise and Bunq, received outright denials of their own national bank charter applications this year, each accompanied by specific findings. Zerohash’s return carried no such public explanation, and the OCC’s own records do not disclose the specific deficiencies that prompted the action.
A spokesperson for the OCC did not immediately respond to questions about the application, and Zerohash did not publicly disclose the return when it occurred, despite having announced the original filing.
Zerohash Says It Will Refile With a Narrower Scope
In a statement, Zerohash said the return was an administrative step taken in coordination with the OCC and described it as “not a substantive decision on the merits of our application.” The company said its existing operations continue unaffected under its current regulatory approvals, and that it plans to refile by the end of the month.
Zerohash indicated its original application had covered a broad set of planned trust bank activities and that the new filing will take a more sequenced approach, starting with a narrower set of national trust activities aligned with its rollout timeline.
The company said it expects a swift review of the resubmission, though the OCC has not confirmed any expedited timeline.
Despite the setback, job postings reviewed for a “Zerohash National Trust Bank” listed a chief trust officer and chief operating officer role, describing the entity as having a pending charter application.
Zerohash co-president Stephen Gardner’s professional profile similarly lists him as chief executive of the pending trust bank entity.
Part of a Broader Wave of Trust Bank Applications
Zerohash filed its original application in March, joining a rush of firms seeking trust bank charters following passage of the Guiding and Establishing National Innovation for U.S. Stablecoins Act, which established a federal legal framework for stablecoin issuers.
The Independent Community Bankers of America objected to Zerohash’s application in April. The group’s letter noted the OCC had processed filings from Circle Internet Group, Ripple, Paxos Trust, BitGo, Fidelity Digital Assets, Crypto.com, Payoneer and Zerohash in under a year, warning of a pace of eleven filings or approvals in under one hundred days in some windows.
The OCC issued a bulletin in June describing its updated process for returning applications it deems materially deficient without a formal denial, though the OCC has not stated whether that policy applied to Zerohash’s case, which came the following month.
A Compliance Lawsuit Runs in the Background
Separately, Zerohash has been contesting a lawsuit filed by its former chief compliance officer, Edgar Guerra, in California. Guerra, a former Federal Reserve regulator, alleges he was fired in an effort to conceal compliance issues he and his team had identified, including more than 200 significant gaps he says were found internally.
Some of those gaps involved anti-money-laundering controls that had reportedly been flagged previously and not fully addressed. These are allegations made in an active lawsuit and have not been resolved by a court. Zerohash’s attempt to move the case into arbitration was preliminarily rejected.
It remains unclear whether OCC officials were aware of the litigation or any compliance concerns raised in it when reviewing Zerohash’s charter application. Zerohash declined to comment on the case, and an attorney for Guerra did not immediately respond to a request for comment.
In a 2022 interview conducted early in his tenure, Guerra described the leadership at the time as “really committed to making sure that compliance is a competitive advantage.”
What the Charter Means, and What It Doesn’t, for Zerohash’s Business
Zerohash is already a state-chartered trust bank, and a person familiar with its operations said its business with E*Trade does not depend on securing a federal charter. The company has also built infrastructure for BlackRock, Franklin Templeton, Stripe, Interactive Brokers and DraftKings.
It had separately been pursuing a new funding round at a valuation above $1.5 billion as of May, and had held acquisition talks with Mastercard that ultimately did not result in a deal.
