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Fintech Firm Applies for Banking Charter; Venture Firms Pour Money into Startups

According to a Wall Street Journal report, Varo Money Inc., a digital banking startup, has applied for a national banking charter with the OCC and deposit insurance from the FDIC.  Varo, which was founded in 2015, partners with traditional banks to provide deposits and lending services. If approved for a license, Varo would become eligible to accept deposits, pay interest, make loans in any state, and issue cards, using smartphone apps, the WSJ reported. The OCC chief recently expressed support for giving bank charters to fintech firms although state regulators are seeking to block the bank regulator’s initiative and have filed lawsuits alleging that the federal government lacks authority to grant such charters. Meanwhile, fintech startups are receiving record amounts of funding from venture firms. Bloomberg, citing a report from CB Insights, reported that so far this year there have been 496 fintech startup deals globally, raising a total of $8 billion, approximately $6.1 billion shy of the annual record set in 2015. Bloomberg reported that some of the sectors seeing the biggest share of investment dollars were blockchain and bitcoin startups, which saw funding increase 100 percent on a quarterly basis.  Regulators are also exploring the growth of the fintech industry. FINRA and the CFTC recently announced initiatives aimed at understanding and adapting to fintech innovations. The CFTC announced in mid-May that it will launch LabCFTC, two programs designed to help fintech innovators engage with the agency, and FINRA recently launched its Innovation Outreach Initiative, which among other things will create a committee to facilitate discussion and receive feedback from the industry on how FINRA rules interact with fintech innovations.