U.S. Banks Sue Regulator Over Approval of Crypto Trust Charters

The Independent Community Bankers of America has brought a lawsuit against the Office of the Comptroller of the Currency, challenging the regulator’s authority to issue national trust-bank charters to cryptocurrency companies.

The ICBA filed the complaint in federal court Friday, alleging that the OCC has interpreted the National Bank Act too broadly by expanding the powers available to national trust banks. The banking group argues that the approach allows crypto firms to enter the U.S. banking system without being held to the same regulatory standards as community banks.

The organization says that difference could create a competitive disadvantage for smaller banks. It argues that trust-chartered crypto companies are not subject to equivalent requirements for areas including capital, liquidity, supervision and Federal Deposit Insurance Corp. coverage.

As a major trade organization representing community banks, ICBA has been involved in several recent crypto-policy debates. It opposed the Digital Asset Market Clarity Act, which failed to advance in the U.S. Senate last month, with banking groups raising concerns about the legislation’s stablecoin provisions and their potential impact on traditional deposit accounts.

The latest legal challenge focuses on national trust charters, which crypto businesses have increasingly sought as a way to gain a regulated foothold in the U.S. financial and payments system.

ICBA President and CEO Rebeca Romero Rainey said the charter was not intended to function as a route for crypto companies to obtain federal banking status without assuming the responsibilities associated with traditional banking institutions. She pointed to differences in capital, liquidity, supervision and FDIC insurance requirements.

An OCC spokesperson told CoinDesk that the agency does not comment on litigation.

The crypto firms receiving trust charters generally have business models that differ from those of community banks. Many do not accept conventional cash deposits, meaning their activities do not involve the same type of FDIC-insured deposit accounts offered by traditional banks.

The Bank Policy Institute said it supports allowing innovative financial products and services into the regulated banking system, provided firms carrying out the same activities are subject to consistent rules and responsibilities. BPI executive vice president Paige Pidano Paridon said trust-chartered companies should limit themselves to trust-related activities, while businesses seeking to provide traditional banking services should obtain full-service bank charters.

The growing interest in national trust charters has also contributed to an increase in new banking entrants following an extended period of limited charter activity. Crypto-focused firms such as Protego and Erebor have pursued the model, while established digital-asset companies including Coinbase, Circle and Crypto.com have also sought trust-bank charters.

World Liberty Financial, a crypto company partly owned by President Donald Trump and his family, recently received approval for a trust charter. Democratic Senator Elizabeth Warren criticized the decision, arguing that it could provide another means for Trump and his family to financially benefit.

In a separate move last month, the OCC granted a full national bank charter to OpenReserve Bank, a blockchain-focused institution backed by Andreessen Horowitz, Jump Capital and Coinbase Ventures, among other crypto investors.

The ICBA lawsuit now challenges the OCC’s use of the national trust-bank framework for crypto companies and could ultimately test the limits of the agency’s chartering authority under federal banking law.