Community bankers sue the OCC over national trust charters for crypto firms
Victoria Shinder2 min readThe Independent Community Bankers of America has sued the Office of the Comptroller of the Currency in federal court, arguing that the regulator has exceeded its legal powers by granting national trust bank charters to crypto companies, CoinDesk reports. The suit was filed on Friday, 2 October.
According to the ICBA, the OCC is claiming "sweeping new powers" to charter national trust banks that the National Bank Act does not authorise, and is letting these firms into the US banking system without the oversight community banks face, which puts small banks "at a severe competitive disadvantage." The Defiant reports that the complaint targets the conditional approval granted to Protego and asks the court to stop the agency from issuing charters under the rule and guidance the bankers dispute.
"Congress did not create the national trust charter as a side door into the banking system for crypto firms seeking the credibility of a federal bank charter," ICBA president and chief executive Rebeca Romero Rainey said. She added that these firms do not carry the same obligations on capital, liquidity, supervision or deposit insurance from the Federal Deposit Insurance Corporation. An OCC spokesperson told CoinDesk the agency does not comment on litigation.
Who has charters. The OCC has approved a steady flow of trust charters for crypto firms. Some, such as Protego and Erebor, were set up as crypto-focused banks; others come from established companies, including Coinbase, Circle and Crypto.com. A recent approval went to World Liberty Financial, which is partly owned by President Donald Trump and his family; Senator Elizabeth Warren has criticised that decision. These trust banks do not plan to offer the cash deposit accounts that FDIC insurance is designed to protect, which is part of why their supervision differs.
The ICBA represents mainly smaller institutions and was among the banking groups whose objections helped stall the Digital Asset Market Clarity Act in the Senate last month, over concerns that its stablecoin provisions left deposits exposed to competition. After the article was published, the Bank Policy Institute, which represents large banks, said firms should be limited to trust activities under trust charters and should seek full banking charters if they want to do traditional banking.
What it means
The trust charter has become the main route for crypto firms into the federal banking system, and this suit is the first direct legal challenge to how the OCC grants it. Until a court rules, every approval — and the custody and payment businesses built on them — carries a question about whether the charter itself will stand.