Banks Warn Coinbase's Trust Charter Poses Profitability and Crypto Custody Risks

Coinbase's bid to secure a national trust charter has sparked fierce backlash from traditional banking groups, with the Independent Community Bankers of America (ICBA) leading the charge against the cryptocurrency exchange's application. The ICBA, which represents smaller financial institutions, submitted a letter to the Office of the Comptroller of the Currency (OCC) this week, urging the regulator to reject Coinbase's request for a trust charter. The group argued that the crypto firm's proposal includes "untested" elements related to crypto custody and warned that Coinbase's trust subsidiary would "struggle to achieve and maintain profitability during crypto bear markets", according to a Cointelegraph report.

Coinbase's chief legal officer, Paul Grewal, responded sharply on X, accusing the ICBA of opposing a "regulated trust charter because you prefer crypto to stay... unregulated." He framed the pushback as an effort by bank lobbyists to "dig regulatory moats to protect their own", according to Yahoo Finance. The exchange applied for the charter in October as part of its broader strategy to "bridge the gap between the crypto economy and traditional financial system," according to its public statements. The OCC, which oversees federal banking charters, has not yet commented on the ICBA's letter.

The ICBA's opposition aligns with broader resistance from the banking sector to crypto firms encroaching on traditional financial territory. The Wall Street-aligned Bank Policy Institute (BPI) previously criticized trust applications from companies like Ripple, Circle, and Paxos, and it has also targeted Coinbase. The ICBA's letter emphasized that Coinbase's trust model relies on "demonstrably flawed risk and control functions" and questioned the OCC's authority to approve the application under existing statutory standards, the Yahoo piece added.

While Coinbase insists it has "no intention of becoming a bank," its application mirrors similar moves by other crypto players. Ripple Labs and Circle have also sought national bank charters, signaling a growing push for regulatory clarity in the crypto space, Cointelegraph later noted. The OCC is expected to take 12 to 18 months to evaluate Coinbase's application, adding to the uncertainty for companies navigating the evolving regulatory landscape.

The debate has broader implications for the crypto industry's integration into traditional finance. Coinbase's recent financial performance underscores its growing influence: the firm reported $840 billion in derivatives volume in Q3 2025 and saw its USDC holdings reach $15 billion on average. It is also a major component of several crypto-focused ETFs, including the First Trust SkyBridge Crypto Industry & Digital Economy ETF (CRPT), which holds 16.38% of its assets in Coinbase, according to Nasdaq.

As regulators weigh the risks and benefits of granting trust charters to crypto firms, the clash between innovation and legacy banking interests shows no signs of abating. The outcome could shape the future of how crypto platforms interact with the U.S. financial system.