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Illustration: Rebecca Zisser/Axios

The FDIC has given Varo Money its official seal of approval, according to Varo CEO Colin Walsh.

Why it matters: It's the crucial second step for Varo to become a national bank, following the Office of the Comptroller of the Currency granting its own preliminary approval back in October.

  • Up until now, digital banks have had to piggyback on older, more established banks for their banking operations. (Or else, like Goldman Sach's Marcus and BBVA's Simple, they're subsidiaries of bigger banks.)
  • Varo Money is now set to receive the first "de novo national bank charter" ever given to a fintech startup. That should give it a level of freedom and flexibility its competitors lack.

Background: Digital banks have dreamed of this day since Bank Simple first launched in 2012, but it's been a long time coming. While Goldman Sachs received its bank charter in one day in 2008, the process for Varo Money has taken more than three years.

  • Bank regulators have worried that VC-backed startups are too thinly capitalized to survive a crisis or avert a bank run, or that they lack the necessary depth of banking expertise. Varo has now shown that those concerns can be addressed.

What they're saying: "From a regulatory perspective, this is a recognition that technology-driven banking is now mainstream," Walsh tells Axios. "This has been a three-year process, and we've spent tens of millions of dollars on it. That's something of a moat for us. It's hard to find investors willing to put that kind of money upfront without the certainty of reaching the finish line."

Be smart: The move means that Varo will finally control its own deposits, and it will be able to use them to fund loans. That will give Varo a significant advantage over other challenger banks like N26, Aspiration and Chime.

What's next: Walsh sees final approvals coming in Q2, at which point accounts will start being transferred over from Bancorp, Varo's current partner bank. Once Varo has access to all of its customers' data and money, it will start being able to offer new products like credit cards, joint accounts and certificates of deposit.

Go deeper

Merrick Garland: Domestic terror is "still with us"

Photo: Kevin Dietsch/UPI/Bloomberg via Getty Images

In his first major speech, Attorney General Merrick Garland warned the nation Monday to remain vigilant against the rising threat of domestic extremism.

Why it matters: Domestic terrorism poses an "elevated threat" to the nation this year, according to U.S. intelligence. Garland has already pledged to crack down on violence linked to white supremacists and right-wing militia groups.

Updated 2 hours ago - Politics & Policy

"Believe your eyes": Prosecutors make closing arguments in Chauvin trial

Steve Schleicher, an attorney for the prosecution in Derek Chauvin's trial, began closing arguments on Monday by describing in detail George Floyd's last moments — crying out for help and surrounded by strangers, as Chauvin pressed his knee into Floyd for nine minutes and 29 seconds.

Why it matters: The jury's verdict in Chauvin's murder trial, seen by advocates as one of the most crucial civil rights cases in decades, will reverberate across the country and have major implications in the fight for racial justice.