Figure SPAC plans to merge with bank, implement blockchain – Ledger Insights

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

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

“We believe the Proposed Transaction provides a unique value creation opportunity by combining the Bank’s sound balance sheet, nationwide footprint and seasoned management team with our team’s deep understanding of, and experience with, the application of technology to regulated financial services businesses as well as the necessary capital to grow and execute against our shared vision of the future of banking,” said Michael Cagney, Chairman of the Board of Directors of the Company.

Figure has wanted a banking license for years

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

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

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

What will the OCC regulator think?

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

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

Here’s the requirement: “Flagstar NA shall divest its interest in USDF Consortium LLC, and any related holdings of Hash (Provenance blockchain token), within two years from the date of consummation of the merger unless the OCC determines in writing that it is permissible for the bank to retain these investments. Additionally, Flagstar NA shall not increase its membership interest in USDF Consortium LLC or its Hash holdings, or holdings of any other crypto-related currency or token, unless and until the OCC determines that the membership interest and Hash or other crypto-related holdings are permissible for a national bank.“

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