Zerohash, the crypto infrastructure firm that supports major financial companies including Morgan Stanley’s E*Trade, plans to submit a new application after the Office of the Comptroller of the Currency returned its bid for a U.S. national trust bank charter.
The Chicago-based company’s application was sent back last month, keeping Zerohash out of the group of firms that have recently received provisional trust-bank approvals from the OCC, particularly companies looking to expand into digital-asset services.
The regulator did not issue a formal rejection. Instead, it returned the filing, a process the OCC uses when an application is considered materially incomplete or deficient. Zerohash said the return was administrative and coordinated with the OCC, allowing it to submit a revised application this month.
In a statement, Zerohash said the return does not represent a decision on the substance of its proposal and does not affect its existing business, which continues under its current regulatory approvals.
The company had recently advertised positions including national trust officer and chief operating officer roles for a planned “Zerohash National Trust Bank.” The proposed institution was described as having a charter application pending with the OCC. Zerohash Co-President Stephen Gardner’s LinkedIn profile also lists him as CEO of the proposed bank.
Zerohash acknowledged that its original filing may have been too broad. The application covered a wide range of digital-asset and fiduciary services, while the company now plans to pursue a more gradual strategy.
The revised filing is expected to seek approval for a narrower set of national trust activities that fit the company’s planned rollout. Zerohash said it is seeking a prompt review from the OCC.
Zerohash to Refile for Federal Trust Charter
Zerohash submitted its original application in March as the number of crypto companies seeking OCC trust-bank approvals was rapidly increasing. The trend gained further momentum after the U.S. established a regulatory framework for stablecoin issuers through the Guiding and Establishing National Innovation for U.S. Stablecoins Act.
OCC records show that Zerohash’s application was returned on July 17, although the agency’s records do not provide a specific reason.
A returned application differs from a formal denial because the regulator does not necessarily provide a detailed explanation. Zerohash also did not withdraw the filing voluntarily and did not publicly disclose that it had been returned at the time.
The OCC did not immediately respond to questions about Zerohash’s application, while Morgan Stanley declined to comment.
The regulator had issued guidance shortly before the return explaining its process for handling deficient applications. The OCC can return a filing if it does not contain sufficient information about an applicant’s financial condition, management or other required details.
The agency can also return an application as materially deficient if an applicant fails to adequately address information requests made during the review process.
Crypto Trust-Bank Applications Draw Scrutiny
Zerohash’s application faced an objection from the Independent Community Bankers of America in April. The group criticized what it viewed as the rapid pace of crypto-related trust-bank applications and approvals, arguing that the speed could make careful and transparent regulatory policymaking more difficult.
The organization cited applications or conditional approvals involving Circle, Ripple, Paxos, BitGo, Fidelity Digital Assets, Crypto.com, Payoneer and Zerohash.
Zerohash was also reportedly exploring additional financing earlier this year at a potential valuation above $1.5 billion, while its federal trust-bank application was still active.
The company provides crypto infrastructure to businesses including BlackRock, Franklin Templeton, Stripe, Interactive Brokers and DraftKings. It already operates as a state-chartered trust bank, and a person familiar with its operations said its E*Trade relationship does not rely on securing a federal charter.
Former Compliance Executive Files Lawsuit
Separately, Zerohash is facing a lawsuit from former Chief Compliance Officer Edgar Guerra, who alleges that he was dismissed after raising concerns about compliance practices at the company.
Guerra, a former Federal Reserve regulator, claimed that he and his team identified more than 200 significant compliance gaps, including issues involving anti-money-laundering controls. He also alleged that some of those weaknesses had been identified previously but were not adequately resolved.
It is not clear whether the OCC was aware of Guerra’s allegations or whether they influenced the decision to return Zerohash’s application. The legal dispute remains ongoing, while the company’s attempt to move the case to arbitration has faced an initial setback.
Zerohash declined to comment on the lawsuit, and Guerra’s attorney did not immediately respond to requests for comment.
In a 2022 interview, Guerra said Zerohash employed roughly two dozen compliance professionals within a workforce of about 150 people. He described the company’s leadership as strongly committed to making regulatory compliance a competitive advantage.
