Finance02 October, 20263 min read
ICBA Sues OCC Over National Trust Bank Charters For Cryptocurrency Firms
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ICBA sues OCC, claiming authority to grant crypto trust charters was exceeded. Lawsuit warns crypto trust charters could divert deposits from community banks and weaken oversight.
ICBA challenges OCC trust charters
The Independent Community Bankers of America sued the Office of the Comptroller of the Currency in the U.S. District Court for the District of Columbia, alleging the OCC exceeded its authority by granting national trust bank charters to cryptocurrency firms.
“The Independent Community Bankers of America (ICBA) filed the suit Friday in the US District Court for the District of Columbia.”
ICBA President and CEO Rebeca Romero Rainey said the OCC’s decision to allow companies to obtain national trust bank charters to conduct substantial non-fiduciary activities exceeds the authority Congress granted the agency.
ICBA argued that 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 without the Community Reinvestment Act obligations, consolidated supervision, capital and liquidity standards, and FDIC insurance.
The lawsuit sought a court order to return the OCC to its statutory limits and to prevent the OCC from approving trust charters for crypto firms whose activities extend beyond traditional trust services.
The OCC did not comment on the litigation when asked, and the agency was described as having not replied by the time of publication.
Competing standards and consumer risk
ICBA argued that crypto trust charters let cryptocurrency firms enter the U.S. banking system without being subject to the same level of regulatory oversight faced by community banks, creating a “severe competitive disadvantage.”
ICBA also warned that “Digital assets held at a crypto firm operating under a national trust charter do not carry those important safeguards,” and it said the group was asking the court to return the OCC to its statutory limits.
The Bank Policy Institute executive Paige Pidano Paridon said BPI supports bringing innovative products into the regulated banking ecosystem, provided that the entities engaging in those activities are subject to the same rules and responsibilities as every other chartered institution.
Paridon added that companies should not receive trust charters unless they plan to limit their operations to genuine trust activities, and she said that if they want to engage in traditional banking activities, they should seek full-service banking charters.
The dispute also centered on the OCC’s March 2 final rule related to Interpretive Letter No. 1176, which ICBA said attempted to provide the OCC with new powers to charter national banks that are not authorized by the National Bank Act.
What the case could change
ICBA’s complaint asked a federal court to find the OCC’s final rule and Interpretive Letter No. 1176 unlawful, and it sought to stop what it described as an expansion of power to charter national trust banks that are not authorized by the National Bank Act.
“According to the filing, the OCC has approved, conditionally or otherwise, 21 trust banks during the Trump administration.”
The ICBA lawsuit also argued that chartering crypto trust banks could drain deposits away from the banking system and put them in institutions that have no obligation or history of lending to local businesses and communities.
The lawsuit described the OCC as having approved, conditionally or otherwise, 21 trust banks during the Trump administration, and it said at least 13 of those banks are crypto companies.
The American Banker report said ICBA called out the approval of an application from Protego Holdings Corporation, and it warned that the ICBA said the firms were at serious risk of failure if the volatile cryptocurrency market crashes.
The outcome of the litigation was framed as potentially clarifying how far specialized trust charters can extend into activities associated with traditional banking under the U.S. federal chartering system.