What had long been a controversial footnote in discussions of bank chartering options is now, within just a few months, touching a nerve in the banking industry by providing new material for its own chapter on bank chartering and structuring. Its renaissance comes at a time when DeFi companies and others are looking to enter the regulated banking fold, catalyzing federal and state bank regulators to recalibrate bank structure. For digital asset banks and others, the question is no longer simply whether to form a bank or buy one, but instead how to find the Goldilocks charter that is just right for a proposed bank’s business model.

Proposed banks with business models focused on the custody and fiduciary activities of digital assets can opt for a national trust bank charter, as many have. But hot on the heels of the OCC’s rebranding of its chartering function, Interpretive Letter 1188, and the conditional approvals of six digital asset national banks in 2025, a “notorious” state chartering option has emerged for proposed banks seeking more reliable funding. For this reason, Ford, GM, PayPal and Affirm, distinct business concepts often not spoken of in the same breath, are all trying to access banking to use deposits to fund their credit products. Without a bank, companies like Ford, GM, PayPal and Affirm fund their credit products through capital markets, warehouse lines, securitization and other means.

On Jan. 22, 2026, Utah approved industrial loan bank (ILB) charters for Ford Credit Bank and GM Financial Bank. Meanwhile, in December 2025 and January 2026, PayPal and Affirm submitted applications to Utah and Nevada state agencies, respectively, for ILB charters. All four companies are looking to avail themselves of deposits for more reliable, cheaper funding and, in turn, survive in this fiercely competitive economy through scalability.

While a traditional bank charter would offer the same funding advantage, any company that owns a bank is generally deemed a bank holding company and is governed by the Bank Holding Company Act (BHCA). The BHCA imposes very constraining restrictions, including limitations on engaging in activities unrelated to banking. In other words, Ford would not be able to operate a bank under a traditional charter and continue manufacturing and selling cars (unless it could convince the Federal Reserve that manufacturing and selling cars are incidental to banking). ILBs, though, are a rare banking charter structure whose parent companies are exempt from the Bank Holding Company Act (BHCA) so long as they continue to meet certain regulatory requirements. That carve-out stems from the Competitive Equality in Banking Act of 1987 (CEBA).

Today, six states authorize industrial loan banks: California, Hawaii, Indiana, Minnesota, Nevada and Utah (with Colorado having repealed its statute). An ILB may accept FDIC-insured deposits and, for most practical purposes, operates like a full-service bank, including the ability to branch and establish loan production offices across state lines. The charter, therefore, provides access to stable, insured funding and the credibility of the federal banking system.

While the benefits of ILBs are clear, they have historically faced regulatory headwinds and are the subject of robust policy debate. On Aug. 1, 2006, the FDIC imposed a six-month moratorium on applications for deposit insurance for ILBs. This moratorium was extended in January 2007, and it was widely reported as a factor in Walmart’s withdrawal of its application for deposit insurance for an ILB it was attempting to charter at the time. The moratorium was later codified in Federal statutes for three years under Section 603 of the Dodd-Frank Act, which expired on July 21, 2013.

Since that time, only a few ILBs have been successfully chartered, including Nelnet Bank, Square and Thrivent Bank. During the same period, the number of industrial loan banks declined. In 2021, the FDIC finalized regulations in 12 CFR Part 354 imposing written agreement requirements, commitments and operational restrictions for certain companies that control an ILB but are not subject to federal consolidated supervision by the Federal Reserve.

At the same time, ILBs continue to face serious opposition, and the debate has never been more heated than it is today. Last fall, Sens. Elizabeth Warren and Andy Kim sent a letter to the FDIC urging Acting Chair Travis Hill to re-impose a moratorium on new deposit insurance applications submitted by ILBs. The Independent Community Bankers of America (ICBA) has consistently opposed ILB charters. In a November 2025 white paper, the ICBA argued that ILBs allow commercial and fintech firms to enjoy the benefits of federal deposit insurance and banking powers without being subject to the full scope of bank holding company regulation. In ICBA’s view, this creates competitive inequities and raises concerns about the separation of banking and commerce.

But in today’s rate environment and the recalibration of bank charter structures, the policy debate faces a rising tide of demand for bank charters in all the flavors they come in. As a result, the ILB charter is no longer a mere footnote. Whether this resurgence lasts is less likely to depend on policy discussion and more likely to depend on execution, supervision, and the industry’s ability to demonstrate that the model can balance innovation with safety and soundness.