| Purpose | Enables firms to move money on behalf of customers (e.g., remittances, crypto transfers) | Authorizes institutions to operate as full-service banks |
| Issued By | State regulators (must apply in each U.S. state individually) | Federal (OCC, FDIC) or state banking authorities |
| Can Accept Deposits? | ❌ No | ✅ Yes (with FDIC insurance in most cases) |
| Can Make Loans? | ❌ No (unless separately licensed) | ✅ Yes |
| Can Hold Customer Funds Long-Term? | ⚠️ Only temporarily, and must be held in safeguarded accounts | ✅ Yes |
| FDIC Insurance on Deposits? | ❌ No | ✅ Yes (for federally insured banks) |
| Access to Federal Reserve System? | ❌ No direct access | ✅ Yes (can open a master account with the Fed) |
| Used By | Fintechs (e.g., Ripple, Circle, PayPal, Stripe) | Commercial banks (e.g., JPMorgan, Bank of America) |
| Crypto Custody & Payments? | ✅ Yes (commonly used for crypto payments and wallets) | ✅ Yes (with additional regulatory compliance) |
| Scope of Operation | Must apply in and comply with each state’s rules separately | National banks can operate across all states automatically |
| Capital Requirements | Relatively low (varies by state) | High (millions to hundreds of millions USD depending on scale) |
| Regulatory Burden | Medium (multi-state reporting, bonding, audits) | Very high (bank examiners, Basel capital rules, etc.) |
| Example Companies | Circle, Ripple, Revolut (US), Cash App, Wise | Chase, Wells Fargo, SoFi Bank (after conversion) |
Invest Alpha 