Community Banks Sue US Regulator Over Crypto Firm Charters

A trade organization that represents U.S. community banks has filed a lawsuit against the Office of the Comptroller of the Currency, arguing that the agency has no authority to issue national trust charters to firms that do most of their business in cryptocurrency and other digital assets.

The Independent Community Bankers of America, a group representing thousands of community banks, filed the lawsuit Friday. The group alleges the OCC has exceeded its authority under the National Bank Act by broadening the range of activities allowable with a national trust charter.

The legal battle comes as the OCC has authorized an increasing number of applications from crypto and fintech firms seeking national trust charters. In its own records, the OCC has a backlog of applications from firms looking to offer digital-asset products and services - such as crypto custody - and other activities.

"I would say the enthusiasm around some of the digital-asset-related applications has only increased since the president took office," OCC comptroller Jonathan Gould told American Banker in August. "We've seen a growing number of these applications, both for new banks and for conversion of banks," including 23 of the 40 new bank-chartering applications the OCC had received since President Trump took office.

Community bankers say that crypto firms could obtain access to some of the federal banking system while not having to meet the entire suite of requirements that traditional full-service banks must meet. The ICBA has warned that national trust charters, stablecoins and other types of access to the federal banking system could impact community-bank deposits and lending.

The disagreement partly hinges on the difference between a national trust bank and a traditional commercial bank. Trust banks can offer fiduciary and custodial services, but they are not identical to a full-service bank. The community-bank group says the OCC's interpretation has the potential to enable some companies to engage in activities outside the normal realm of trust banks.

Industry Eyes Further Challenges In the Suit Over Crypto Policy The legal challenge to the OCC's crypto policy comes amid criticism from the banking industry over the move. Larger banks and state authorities have expressed fears about its competitive and regulatory implications.

This legal battle could settle how much OCC will back national trust charters as more crypto firms get closer to the US banking system. It also arrives as federal regulators are drafting rules around stablecoins and digital assets that could define the future relationship between banks and the crypto market.