The banking industry of the United States has coordinated efforts to oppose the approach of the Office of the Comptroller of the Currency (OCC). This movement aims to challenge the attempts of regulators who want to integrate cryptocurrency companies into the federal banking system.
On December 12, OCC conditionally approved the issuance of national trust company licenses to 5 digital asset companies, including Ripple, Fidelity, Paxos, First National Digital Currency Bank, and BitGo, with the banking regulator emphasizing that these crypto applicants have undergone the same 'rigorous review process' as all national bank license applicants.
The U.S. banking industry is challenging the actions of the OCC.
However, the American Bankers Association (ABA) and the Independent Community Bankers of America (ICBA) believe that OCC's actions create a dual banking system in the United States.
Their main allegation is that fintech and crypto companies are receiving symbolic national bank licenses without the protections of the Federal Deposit Insurance Corp. (FDIC) or complying with the capital and liquidity standards that traditional banks must adhere to.
These groups also argued that such a structure incentivizes what they call regulatory arbitrage at the federal level.
Since when crypto companies receive national licenses, those companies can benefit from the non-enforcement of state regulations for money transmitters while also avoiding many compliance obligations that apply to insured depository institutions.
Rob Nichols, president of the ABA, stated that these approvals 'blur the lines' of the definition of banking, and he also argued that undermining this definition risks diminishing the stability of the licenses themselves.
In his view, extending trust powers to companies that do not act in a traditional fiduciary capacity will create a class of institutions resembling banks in name and scope but lacking equivalent oversight.
At the same time, their concerns extend beyond just competition issues.
The banking group warned that individual consumers may be confused in distinguishing between insured banks and national trust institutions that hold large amounts of uninsured crypto assets.
They see that OCC has not adequately explained how to manage the failures of such institutions, particularly if the institution holds digital assets worth billions of USD that are outside the traditional safety net.
ICBA is calling for a halt to the approval of licenses.
At the same time, ICBA has raised direct questions about the legal authority of OCC in issuing these licenses.
This group has focused criticism on Interpretive Letter No. 1176, which allows trust banks to engage in activities beyond the traditional fiduciary responsibilities, such as holding reserves for stablecoins.
Rebeca Romero Rainey, president of ICBA, described the action as a 'major policy change' that expands the scope of national trust bank licenses beyond their historical purpose.
Rainey further stated that OCC's major policy shift under Interpretive Letter #1176 represents a departure from the roles of traditional trust companies and also contributes to an inconsistent regulatory framework that poses a threat to financial stability. However, the agency must change direction.
The group argues that OCC is allowing non-bank fintech companies to borrow the credibility of the U.S. banking system while these companies are not being regulated to the same full extent as insured deposit institutions.
As a result, both trade associations have called for an immediate pause and rescission of all approvals.
They warned that the current operational framework could create institutions that the OCC 'is not equipped to address systemic issues', which, if a failure occurs, could expose traditional banks and the financial system as a whole to risks.
