Banking Groups Urge OCC to Delay Crypto Charter Decisions

U.S. banking groups, including the American Bankers Association and other bank and credit union trade groups, have urged the Office of the Comptroller of the Currency (OCC) to delay its decision on granting national banking charters to crypto firms Ripple and Circle. The primary concern raised by these groups is the lack of transparency in the applications submitted by Ripple and Circle. They argue that the public portions of these applications do not provide enough information for a thorough assessment of the proposed business models and operations.

The banking groups have expressed that approving national bank charters for stablecoin issuers like Circle Internet Group and Ripple Labs would mark a significant shift from current policies. They contend that the business models proposed by these crypto companies do not align with the fiduciary activities traditionally performed by national trust charter banks. The groups emphasize that providing custodial services for digital assets is not considered a fiduciary activity, and granting charters without these traditional activities would represent a substantial policy change by the OCC.

In their request, the banking groups have called for a pause on the approval of these charters, asserting that the public should have the opportunity to review and scrutinize the OCC's decision-making process. They warn that allowing crypto firms to operate as national trust banks providing traditional banking services could pose a material risk to the U.S. banking and financial system. The groups suggest that other companies might follow suit, leading to potential disruptions in the financial landscape.

Caitlin Long, the founder of crypto-focused bank Custodia Bank, commented on the situation, noting that the issue of whether trust charters can be used as de facto bank charters with reduced capital requirements is likely to be litigated. She also pointed out the potential for banks to convert to trust companies to avoid stringent capital requirements and regulations.

Alexander Grieve, the government affairs head at venture firm Paradigm, responded to the letter by highlighting the rare agreement between banks and credit unions on the matter. He suggested that the banking groups' reaction indicates a fear of competition from crypto firms.

Logan Payne, a crypto-focused lawyer at Winston & Strawn, discussed the implications of the newly passed stablecoin laws under the GENIUS Act. He noted that these laws create an incentive for stablecoin issuers to seek a banking license, as the new stablecoin license would limit their activities to issuing stablecoins only. Payne explained that stablecoin issuers would need state-level money transmission licenses to operate nationally, even with the new license, making a national trust bank charter with the OCC an attractive option. This charter would allow them to engage in a wider range of activities without the need for state-to-state licenses.