Today, Figure Acquisition Corp 1 said it has signed a non-binding letter of intent to merge with a bank holding company that is a mortgage lender and warehouse lender. Figure SPAC (market cap: $412 million) is affiliated with blockchain startup Figure Technologies, and the merged SPAC intends to implement blockchain solutions post-merger. The unnamed target bank is privately owned, with $3 to $5 billion in assets.

To complete the merger, Figure SPAC is requesting a six-month shareholder time extension until August 23, 2023.

“We believe the Proposed Transaction offers a unique value creation opportunity by combining the Bank’s strong balance sheet, nationwide presence and experienced management team with our team’s deep knowledge and experience in applying technology to regulated financial services businesses, as well as the capital necessary to grow and execute on our shared vision of the future of banking,” said Michael Cagney, Chairman of the Company’s Board of Directors.

Figure has wanted a banking license for years.

While the acquirer is Figure SPAC, affiliate Figure Technologies has long coveted a banking license, applying for one in 2020 when crypto-friendly Brian Brooks was acting as comptroller of the currency. However, there was significant pushback from the American Bankers Association and Brooks left the OCC in early 2021.

Figure Technologies launched the Provenance Blockchain in 2018 as a separate entity that houses transactions ranging from mortgages to payments, funds, and asset-backed securities. It has a native token, Hash.

In August of last year, Figure merged with Homebridge, a mortgage lender that originated $25 billion in loans in 2020.

What will the OCC regulator think?

Shortly thereafter, New York Community Bank (NYCB) invested in Figure and, along with community banking alliance JAM FINTOP, are co-founders of the USDF Consortium. USDF aims to use blockchain tokens or deposit-pegged stablecoins for interbank payments.

However, NYCB’s recent experience with the OCC could be relevant to the Figure SPAC merger as it seeks OCC approval. NYCB is in the process of merging with Flagstar Bank to become Flagstar Bank NA, and the OCC has imposed merger requirements. These give the OCC the right to compel NYCB/Flagstar to divest its interest in the USDF Consortium and prevent NYCB/Flagstar from expanding its cryptocurrency-related activities.

Here is the requirement: “Flagstar NA shall divest its interest in USDF Consortium LLC, and any related Hash holdings, within two years from the consummation date of the merger, unless otherwise determined by the OCC. writing that the bank is allowed to retain these investments. In addition, Flagstar NA will not increase its membership interest in USDF Consortium LLC or its Hash holdings, or holdings in any other crypto-related currency or token, unless and until the OCC determines that the membership interest and Hash or other holdings related to crypto are admissible for a national bank.“

The OCC statement also says that the OCC is “currently reviewing the permissibility of this investment.” [i.e., membership in the USDF Consortium] in an unrelated case.”