Banking Groups Urge OCC to Delay Crypto Firm Licenses

Major US banking trade groups have urged the Office of the Comptroller of the Currency (OCC) to postpone its decision on granting bank licenses to crypto firms. The groups, including the American Bankers Association and several credit union organizations, expressed significant concerns over the potential policy and procedural implications of approving national bank charters for stablecoin issuers such as Circle Internet Group, Ripple Labs, and Fidelity Digital Assets.

The banking groups argued that the business plans of these crypto firms do not align with the traditional fiduciary activities performed by national trust banks. They highlighted that the public portions of the crypto firms’ applications lack sufficient information for stakeholders to evaluate their business models and operations. The groups warned that allowing crypto firms to operate as national trust banks without the traditional fiduciary activities would represent a significant shift in OCC policy, which should only occur after a thorough public notice and comment period.

If approved, the licenses would enable crypto firms to act as their own banks, settle payments rapidly, and operate under a federal regulatory structure. This would allow them to bypass complex state-level licensing requirements while expanding their operations across the US. The banking groups expressed concerns that if crypto firms are allowed to provide traditional banking services like payments under a trust charter, it could encourage more non-bank companies to seek similar licenses, presenting a material risk to the US banking and financial system.

Caitlin Long, founder of Custodia Bank, commented that the dispute over whether trust charters can serve as “de facto bank charters” with minimal capital requirements is likely to lead to litigation. She highlighted the paradox that if crypto firms succeed in obtaining trust charters for banking activities, traditional banks might convert to trust companies to reduce regulatory burdens.

Alexander Grieve of Paradigm noted the unusual unity between banks and credit unions on the matter, suggesting that they seem to agree that they’re finally about to have some competition from crypto. Logan Payne, a crypto lawyer at Winston & Strawn, explained that under the newly passed GENIUS Act stablecoin laws, crypto firms face incentives to seek a national banking license to expand their activities beyond stablecoin issuance without requiring state-by-state licenses.

According to Payne, securing an OCC charter would allow stablecoin issuers to operate more freely while engaging in a broader range of financial services within a unified federal framework. The banking groups' concerns underscore the need for a careful evaluation of the potential risks and benefits of granting bank licenses to crypto firms, ensuring that any policy changes are made with thorough public scrutiny and consideration.