US banking groups have urged the country’s banking watchdog to postpone its decision on crypto companies’ bank licenses until more details about their plans are public, claiming that allowing the bids would be “a fundamental departure” from current policy.
The American Bankers Association and other bank and credit union trade groups said in a letter to the Office of the Comptroller of the Currency (OCC) on Thursday that its approval of national bank charters for the likes of stablecoin issuers Circle Internet Group and Ripple Labs “would raise significant policy and process concerns.”
“There are significant policy and legal questions as to whether the Applicants’ proposed business plans involve the types of fiduciary activities performed by national trust banks,” the groups argued.
Circle, Ripple and Fidelity Digital Assets are among a recent group of crypto-focused firms that have applied for banking licenses with the OCC, which would essentially allow them to be their own bank, settle payments faster and be regulated at a federal level, allowing them to operate in every state.
Banks want a pause on greenlighting charters for crypto
The groups have asked the OCC to postpone its decision on the crypto firms’ charter bids, claiming that the public portions of their applications “do not provide sufficient information for the public to assess or provide meaningful comment on the Applicants’ proposed business models and operations.”
They added that the public should also be able to scrutinize the OCC if it allows the applications, adding it would be a departure from long-standing policy as the business models put forward by the crypto companies “do not involve the types of fiduciary activities historically performed by national trust charter banks.”
“Providing custodial services for digital assets is not a fiduciary activity, and granting charters where traditional fiduciary activity is absent — or, is secondary at best — would represent a significant change in OCC policy that should be made only pursuant to a proper public notice and comment period,” the groups wrote.
They said if the crypto firms are allowed to be national trust banks that provide “traditional banking services like payments,” then other companies could follow, which the groups said would present a “material risk to the US banking and financial system.”
“Interesting reaction” by banking groups
Caitlin Long, the founder of crypto-focused bank Custodia Bank, posted to X on Saturday that the group’s issue on whether trust charters can be used as “de facto bank charters” with just a fraction of the capital requirements is “very likely to be litigated.”
“Interesting reaction by the bank trade associations to fight,” she added. “If what they fear will happen ends up happening, then why wouldn’t banks just convert to trust companies and keep their existing businesses at a small fraction of the capital requirements and regulations?”
Venture firm Paradigm’s government affairs head, Alexander Grieve, said in response to the letter that “banks and credit unions rarely agree on anything. But they seem to agree that they’re finally about to have some competition from crypto.”
Expect more crypto firms wanting bank charters
Logan Payne, a crypto-focused lawyer at Winston & Strawn, recently told Cointelegraph that the newly passed stablecoin laws under the GENIUS Act create an incentive for stablecoin issuers to seek a banking license.
Related: ‘Crypto Week’ ushers in big change: What happens now?
A new stablecoin license under the laws would limit a crypto firm’s activity to only issuing stablecoin, but Payne said that “pretty much every stablecoin issuer in the United States issuing under US law right now engages in activities outside the scope of that license.”
He said a stablecoin issuer would need state-level money transmission licenses to operate nationally, even with the new GENIUS Act license, creating an incentive for stablecoin issuers to apply for a national trust bank charter with the OCC.
Payne said the charter “allows for them to engage in stablecoin issuance plus a wider range of activities, but without having to get state-to-state licenses.”
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