A 25-year-old protégé of billionaire Peter Thiel has built an AI-powered national bank that’s mostly run by code instead of humans – a radical departure from the traditional banking system that has endured for decades.
Augustus Bank – named after the Roman emperor – revealed earlier this week that it had received conditional approval from the Office of the Comptroller of the Currency, or OCC. That made Ferdinand Dabitz the youngest CEO to receive a conditional federal bank charter in more than 100 Years.
In an interview with The Post, Dabitz argued that traditional clearing banks are built on “decades-old technology” and held back by human bankers – creating needless friction in the international banking system despite “infinite global demand” for the US dollar.
“These legacy clearing banks, they’re made of paper, which means they’re very slow and it takes a long time to move money,” Dabitz said. “They’re closed on the weekends, they close after 5 pm. In fact, there are 115 bank holidays a year.”
Founded in 2022, Augustus is just the eight bank to receive a conditional charter from the OCC since 2010, according to Dabitz. Modernizing the western model of banking, he said, is crucial to ensure that the US, not Russia or China, maintains the gold standard internationally.
Augustus will use stablecoins, which are pegged one-to-one with fiat currencies like the US dollar, to process transactions in real time. Dabitz is a Thiel fellowship recipient, awarded to young entrepreneurs who drop out of college to build tech firms.
Augustus’s buzzy announcement of its federal charter, which included an appearance by Dabitz on CNBC’s “Squawk Box,” drew a mixed response from banking experts.
Dabitz rightfully points out some of the key flaws of the international banking system, according to Campbell Harvey, a Duke University professor and the author of “DeFi and the Future of Finance.”
Decentralized financial institutions like Augustus provide an alternative to the SWIFT international banking system, which lacks an obvious failsafe. They also provide the constant bank access that will become increasingly necessary in the age of AI.
“It is no longer acceptable to be working bankers’ hours,” Harvey said. “We need 24/7/365 and decentralized technologies do this.”
However, the traditional banking system, despite its flaws, has endured in large part because it is so proven and stable.
“Those systems are extraordinarily reliable, highly audited, and well understood. Yes, it is frustrating that they are slow and inflexible,” Harvey said. “Any new code, like the Augustus ‘proprietary code’ is untested, and as such, subject to attack.”
“Overall, while I sympathize with some of the problems that Augustus is addressing, their statements raise more questions than answers,” he added. “It is not obvious to me that OCC will grant them a [permanent] charter.”
It’s also unclear if Augustus’s AI-powered vision for the future of banking includes proper safeguards against bad actors, according to Cornelius Hurley, a former assistant general counsel of the Board of Governors of the Federal Reserve System.
The company’s press release announcing the conditional OCC approval is “long on techno-babble and short on specifics,” Harvey added.
There’s no question “the rails of the current system need improvement,” Hurley said.
“I am skeptical, however, that the system they describe is in the public interest.
“There are substantial AML (anti-money laundering) risks associated with ventures such as this,” he added. “The use cases for crypto, for example, are not very attractive to date.”
Dabitz said Augustus is focused on striking the right balance between AI and human oversight to prevent any hiccups.
Executives at the bank will be “in the loop” to review any transaction that could be problematic, such as when suspicions arise about the sender or a name is flagged on a sanctions list.
To that end, Augustus has tapped several well-known figures for its leadership team. Greg Quarles, a veteran of H&R Block Bank and United Texas Bank, will serve as the firm’s president, while Joe Schenone, formerly of JPMorgan Chase, came on board as CFO.
Augustus is trying to gain traction at the same time that the rise of advanced artificial models skilled in hacks, such as Anthropic’s Mythos, have raised new questions about bank security.
Treasury Secretary Scott Bessent notably held a closed-door meeting in which he warned top bank leaders to ensure their systems are protected against AI-powered hackers.
Augustus’s status as a new institution is actually an advantage in that regard, according to Dabitz.
“The thesis on our side is it’s easier to adapt to that change if you build from scratch around that new reality than if you retrofit existing systems to make sure they still somehow ‘kind of work’ in the new world,” he said.
Dabitz expressed confidence that Augustus would receive final OCC approval within the next few months.
An Augustus representative noted that the OCC’s conditional approval would establish the firm as a full-service national bank, which, by definition, would be take deposits and have FDIC approval.
Augustus plans to apply for a master account at the Fed, which is necessary to be a clearing bank.
