The lawsuit, which also named Comptroller Jonathan Gould, challenged the agency’s authority to charter cryptocurrency companies that neither take deposits nor primarily perform traditional fiduciary functions as national trust banks. The suit also challenged a March OCC rule, a 2021 interpretive letter and the agency’s conditional approval of a charter for crypto firm Protego Holdings.
According to a Monday (Oct. 5) analysis by law firm Ballard Spahr, the case puts a new legal front on a broader dispute between traditional banks and the crypto industry over what banks have long characterized as an uneven regulatory playing field. Community banks face deposit-insurance assessments, Community Reinvestment Act requirements, capital and liquidity rules and other federal obligations that do not necessarily apply to non-depository national trust banks.
At issue is Section 27(a) of the National Bank Act, which says a national bank is not illegally constituted simply because the OCC limits its operations to those of a “trust company and activities related thereto.”
The OCC interprets that language broadly, per Ballard. In March, it amended its regulations to replace references to national trust banks being limited to “fiduciary activities” with the broader statutory language. The agency maintains Congress deliberately used “trust company” rather than “fiduciary,” allowing national trust banks to conduct non-fiduciary activities.
That interpretation has opened an important pathway into federal banking regulation for crypto companies, per Ballard. According to the ICBA’s complaint, the OCC has approved or conditionally approved 21 national trust bank charters during the Trump administration, at least 13 involving cryptocurrency companies. Conditional approvals announced in December included Ripple National Trust Bank, BitGo Bank & Trust, Fidelity Digital Assets and Paxos Trust Company.
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The ICBA said the OCC has effectively invented a fourth category of national bank. In its reading, the National Bank Act permits traditional depository banks, bankers’ banks and national trust banks exercising fiduciary powers. It does not authorize institutions that neither accept deposits nor exercise primarily fiduciary powers but nevertheless conduct broad financial activities.
Protego provides a test case for that argument. Its proposed non-fiduciary operations include crypto custody, trading, lending and borrowing, and issuer services, with only certain ancillary services performed in a fiduciary capacity. ICBA also argued the OCC failed to adequately address concerns about Protego’s capital, liquidity, risk management, consumer protection and the resolution of a potentially large uninsured institution.
The competitive implications are central to the lawsuit. The ICBA said two member banks with less than $2.5 billion in assets each spend more than $1.5 million annually meeting regulatory requirements, including FDIC assessments and CRA compliance, while competing against crypto trust banks that avoid comparable costs. Those banks allegedly have already lost hundreds of thousands of dollars in business to crypto companies holding conditional trust charters.
The ICBA also raised consumer-protection concerns. Because an institution using “national bank” in its name may appear equivalent to a conventional bank, customers could mistakenly believe assets held by an uninsured crypto trust bank receive protections comparable to FDIC-insured deposits.
The lawsuit asserts three Administrative Procedure Act claims, per Ballard: that the March rule exceeds the OCC’s statutory authority, that the agency improperly issued binding requirements through Interpretive Letter 1176 without notice-and-comment rulemaking, and that Protego’s approval was unlawful and arbitrary and capricious. The ICBA also invoked the major questions doctrine, arguing the OCC cannot derive sweeping new chartering authority from decades-old statutory language without clear congressional authorization.
The recently enacted GENIUS Act complicates the dispute because it expressly allows uninsured national banks to qualify as payment stablecoin issuers. The ICBA argued, however, that the law neither authorizes crypto activities generally nor retroactively validates previously issued trust charters.
ICBA is asking the court to vacate the March rule, Interpretive Letter 1176 and Protego’s conditional approval, rather than immediately invalidate every crypto trust charter. But the stakes extend well beyond Protego. In the post-Loper Bright era, the court must independently determine what Congress authorized rather than defer to the OCC’s interpretation.
The result could determine whether national trust banks remain a major gateway for crypto companies into the federal banking system, or whether crypto firms seeking the advantages of a national charter must accept more of the regulatory obligations borne by traditional banks.
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