Community bankers sue US regulator over crypto trust bank charters

A major US banking lobby has sued the federal agency that issues bank charters, accusing it of exceeding its legal powers by granting national trust bank status to crypto firms.

The Independent Community Bankers of America (ICBA) filed the lawsuit against the Office of the Comptroller of the Currency (OCC) in federal court on Friday, CoinDesk reported. The group says the agency is claiming "sweeping new powers to charter national trust banks that are not authorized by the National Bank Act".

According to the complaint, the OCC is letting these companies into the US banking system without the regulatory oversight that community banks face, putting smaller lenders "at a severe competitive disadvantage".

"Congress did not create the national trust charter as a side door into the banking system for crypto firms seeking the credibility of a federal bank charter," ICBA president and chief executive Rebeca Romero Rainey said in a statement. The group argues the firms avoid comparable obligations on capital, liquidity and supervision, and do not need insurance from the Federal Deposit Insurance Corp.

An OCC spokesperson told CoinDesk the agency "does not comment on litigation".

The OCC has granted a steady stream of trust charters to crypto firms, some of them newly created crypto-focused banks such as Protego and Erebor, others established names including Coinbase, Circle and Crypto.com. A recent addition was World Liberty Financial, the firm partly owned by President Donald Trump and his family. The trust companies do not offer the kind of cash deposit accounts for which FDIC insurance is designed.

The ICBA, which typically represents smaller institutions, also helped push back against the Digital Asset Market Clarity Act, which failed to advance in the Senate last month, partly over bankers' objections to its stablecoin provisions.

The Bank Policy Institute, in a statement issued after CoinDesk's report, said it supported bringing new products into the regulated system provided the firms follow the same rules. Its executive vice-president, Paige Pidano Paridon, said companies wanting to engage in traditional banking "should seek full-service banking charters".

Sources

• CoinDesk