U.S. banks warn that OCC cryptocurrency letters could weaken the banking system
The U.S. banking industry has mounted a coordinated challenge to the approach of the Office of the Comptroller of the Currency (OCC). The opposition is directed at the regulator's efforts to integrate cryptocurrency companies into the federal banking system.
On December 12, the OCC issued a conditional approval of national trust letters for five digital asset companies, including Ripple, Fidelity, Paxos, First National Digital Currency Bank, and BitGo. The banking regulator emphasized that cryptocurrency applicants underwent the same "rigorous review" as any national bank charter applicant.
Challenges of the U.S. Banking Industry to the OCC's Move
However, the American Bankers Association (ABA) and the Independent Community Bankers of America (ICBA) argue that the OCC's actions create a two-tier banking system.
Their central claim is that fintech and crypto companies are being granted prestigious national charters without having the coverage of the Federal Deposit Insurance Corporation (FDIC) or meeting the traditional capital and liquidity standards required of full-service banks.
The groups contend that this structure fosters what they describe as federal regulatory arbitrage.
By securing a national charter, crypto companies can benefit from federal preeminence over state money transmitter laws. At the same time, they avoid many of the compliance obligations that apply to insured depositary institutions.
ABA President Rob Nichols said that the approvals "blur the lines" of what constitutes a bank. Moreover, he argues that this erosion of definitions risks undermining the integrity of the charter itself.
In their view, expanding fiduciary powers to companies that do not perform traditional fiduciary duties creates a class of institutions that resemble banks in name and scope but lack comparable oversight.
Meanwhile, their concern extends beyond competition.
Banking groups warn that consumers may struggle to distinguish between insured banks and national trust institutions that hold large volumes of uninsured crypto assets.
They argue that the OCC has not adequately explained how it would handle the failure of such an entity, particularly if it were holding billions of dollars in digital assets outside the traditional safety net.
ICBA Wants Charters to be Stopped
ICBA also directly challenged the OCC's statutory authority to issue the charters.
The group focused its criticism on Interpretive Letter No. 1176. This guidance allowed trust banks to engage in non-fiduciary activities such as custody of stablecoin reserves.
ICBA President Rebeca Romero Rainey described the move as a "dramatic policy shift" that extends the national trust charter beyond its historical purpose.
"The OCC's dramatic policy shift under Interpretive Letter #1176 is a departure from the role of conventional trust companies and allows for an inconsistent regulatory framework that threatens financial stability — requiring the agency to change course," Rainey added.
The group argues that the OCC is allowing non-bank fintech companies to effectively borrow the credibility of the U.S. banking system while avoiding the "full scope" of regulations imposed on insured institutions.
In light of this, both trade groups have called for an immediate pause and the rescission of the approvals.
They warn that the current framework could produce institutions that the OCC "is not equipped to resolve in an orderly manner." According to them, such a failure could leave traditional banks and the financial system at large exposed.#BTCVSGOLD $XRP , #WriteToEarnUpgrade $XRP
