Banks Push to Stall Crypto Charter Approvals

Through the past few months, as cryptocurrency regulations have been reshaped by the President Donald Trump administration, crypto firms have applied for national trust bank charters, which would expand the range of services they offer.

Depending on the firm, the charters would grant the ability to settle transactions or connect directly to the Federal Reserve’s payment rails. They would let crypto firms manage assets for clients, but they would not move into insured deposits or lending activities, so they are somewhat limited in scope.

However, banks have concerns, and banking trade groups — proxies for financial institutions themselves — are pushing regulators to take a pause.

A letter from the groups — including the American Bankers Association, America’s Credit Unions, the Consumer Bankers Association, the Independent Community Bankers of America and the National Bankers Association — to the Office of the Comptroller of the Currency takes issue with the applications from the likes of Ripple and Circle.

In one example, Ripple subsidiary Standard Custody & Trust Company applied for a Federal Reserve master account as of the end of June. The account would enable Ripple to custody the reserves for its stablecoin with the Fed and issue and redeem stablecoins outside normal banking hours.

The letter said that based on a “review of the limited information included in the public portions of the applications, the associations believe that 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 suitability of the trust charter for the applicants is a material question of public policy.”

The banking trade groups said in the letter that there’s not enough information in the applications themselves, at least in what is publicly available through those applications, and maintained that more examination is needed.

The Circle application cited the establishment of USDC reserves and “related fiduciary services,” while the Ripple application pointed to “activities that complement” stablecoins and payments, the letter said. But the banking groups said such verbiage does not provide “sufficient detail to allow meaningful public comment” within commentary periods that end in July and August.

The letter said that “the associations urge the OCC to postpone consideration of the applications,” and the delays should be in place until there’s a release of “enough information” for further assessment and commentary.

Mapping the Concerns

The letter pointed to concerns over at least some overlap between national banks and where digital startups might forge their own paths with the charters.

“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 letter said. “…If the applicants are successfully able to establish themselves as national trust banks that do not primarily provide fiduciary services, but instead provide traditional banking services like payments, then … other companies will follow, presenting material risk to the U.S. banking and financial system.”

The move by nonbanks more fully into the banking realm is gaining more regulatory scrutiny. In a separate example, the Federal Deposit Insurance Corp. set a request for information in motion as it examines the path of approving industrial loan companies and industrial banks.