Crypto Firms Face Delay in National Bank License Applications Amid Transparency Concerns

The American Bankers Association, along with several banks and credit unions, has called for a delay in the national bank license applications of three major cryptocurrency companies: Circle Internet Group, Fidelity Digital Assets, and Ripple Labs. In a joint letter sent to the Office of the Comptroller of the Currency (OCC), the association expressed concerns over the lack of clarity in the understanding of these companies’ business models and operations. They argued that this lack of transparency could impair public oversight and potentially lead to shifts in regulatory standards, deepening existing trust issues in the financial system.

The American Bankers Association emphasized uncertainty over whether the applications from these cryptocurrency companies included fiduciary activities typically conducted by national trust banks. They requested a delay in these applications and called for the process to be opened to the public. This move aims to allow for a comprehensive evaluation of the applications’ scope and any changes in the OCC’s approach. The groups conveyed concerns that approving the licenses without ensuring transparency could expose the U.S. banking and financial systems to significant risks. These risks have the potential to cause disruptions in the nation’s financial framework. The letter highlighted the possibility of unanticipated fractures within the financial structure, underscoring the need for public scrutiny before any licensing approval.

Following the implementation of the GENIUS Act, experts anticipate a surge in banking license applications from cryptocurrency companies. The Act provides a clear framework for issuing payment stablecoins, likely boosting application interest. In this context, each decision made by the OCC will set a precedent for other companies. Logan Payne, a crypto-focused attorney, noted that the GENIUS Act allows companies to operate more broadly without needing state-based licenses. The broad scope of this authority raises apprehensions within the banking sector, prompting persistent calls for detailed scrutiny and public transparency throughout the process.

U.S. banking groups have collectively urged federal regulators to temporarily halt the review of national bank charter applications submitted by crypto firms such as Circle and Ripple. This request was formally presented in a joint letter addressed to the OCC. The letter underscores the potential for significant changes in longstanding regulatory practices if these applications are approved. The coalition, led by the American Bankers Association (ABA), contends that the OCC should refrain from evaluating these applications until critical legal and policy issues are thoroughly addressed. The signatories of the letter assert that the business models proposed by these crypto firms are not transparent enough for a comprehensive regulatory analysis or public scrutiny. This lack of clarity raises concerns about the firms' eligibility for national trust bank charters, which are traditionally reserved for institutions engaged in fiduciary services.

The banking groups argue that the core services offered by firms like Circle and Ripple, particularly crypto custody, do not meet the fiduciary requirements necessary for obtaining such charters. They caution that proceeding without full public consultation could lead to regulatory inconsistencies and potentially allow firms with limited capital obligations to bypass established financial oversight structures. This could result in unequal standards, where crypto companies operate with reduced regulatory burdens compared to traditional banks, thereby weakening overall financial safeguards and introducing new risks into the banking system.

If granted, a national bank charter would enable crypto companies to operate across the United States under a single federal license, eliminating the need for separate state approvals. While this would simplify operations for the applicants, it has sparked concerns within the traditional financial sector. Critics warn that such a shift could create unequal standards and weaken financial safeguards, potentially introducing new risks into the banking system. This dispute reflects a broader trend in which digital asset companies are increasingly pursuing federal banking licenses to enhance credibility, expand services, and streamline compliance with evolving regulations. Firms like Circle, Ripple, and Fidelity are seeking to position themselves as key players in regulated financial markets.

Legal analyst Logan Payne noted that new legislation, such as the GENIUS Act, which introduced a specialized license for stablecoin issuers, may be unintentionally encouraging companies to seek more comprehensive banking charters to maintain operational flexibility. Alexander Grieve, head of government affairs at a crypto investment firm, commented on the rare unity among traditional financial institutions. He stated, “Banks and credit unions rarely agree on anything. But they seem to agree that they’re finally about to have some competition from crypto.”

The OCC’s decision on whether to grant federal charters to crypto firms like Ripple and Circle carries significant regulatory and competitive implications. As traditional financial institutions push back against what they see as a disruptive shift in oversight standards, the outcome will likely shape how digital asset companies engage with the U.S. banking system in the years ahead. The dispute underscores the evolving landscape of financial regulation and the challenges posed by the integration of digital assets into traditional banking frameworks.