ICBA Warns Sony's Stablecoin Could Destabilize Financial System

The Independent Community Bankers of America (ICBA) has launched a legal and regulatory campaign against Sony Bank's proposed foray into the crypto sector, urging the Office of the Comptroller of the Currency (OCC) to reject the Japanese conglomerate's application to establish Connectia Trust, a federally chartered institution that would issue a U.S. dollar-backed stablecoin and offer digital asset custody services. The ICBA's Nov. 6 letter to the OCC warns that Sony's plan could destabilize the financial system, mislead customers, and erode the regulatory safeguards that protect traditional banking.

At the core of the ICBA's argument is the claim that Connectia's stablecoin model dangerously mimics demand deposits, a function traditionally reserved for insured banks, while bypassing key obligations such as Community Reinvestment Act (CRA) requirements and FDIC insurance. The group emphasized that trust banks, by statute, are not permitted to take deposits, and Connectia's stablecoin-described as a "digital substitute" for cash-risks confusing consumers into treating it as a bank deposit. This, the ICBA argues, creates a regulatory arbitrage where Sony could capture the benefits of a bank charter without accepting the full burden of compliance.

Transparency concerns further complicate the application. The public version of Sony's proposal omits critical details on reserve composition, redemption processes during market stress, and contingency plans for cyberattacks or liquidity runs. The ICBA called on the OCC to demand a more comprehensive business plan, warning that approving the application under a veil of secrecy would set a dangerous precedent for future crypto banking ventures.

The group also raised systemic risks tied to Connectia's potential scale. A collapse of the stablecoin, they argued, could force the rapid liquidation of U.S. Treasury holdings to meet redemption demands, triggering broader market instability. The OCC, which has never appointed a receiver for an uninsured national bank since 1933, lacks the tools to manage such a scenario, the ICBA noted. Handling crypto custody during a receivership would require unprecedented coordination with blockchain infrastructure, a process that could permanently strand customer assets if mishandled.

Sony's application, if approved, would position it alongside crypto-native firms like Coinbase and Circle in the vanguard of national digital banking. However, the ICBA framed the proposal as a threat to community banks, which face an uneven playing field if large corporations can sidestep traditional banking regulations. "This is not just about Sony," one ICBA representative stated. "It's about preserving the integrity of the banking system and ensuring fair competition for community institutions."

The OCC has not yet responded to the letter but is expected to issue a decision in the coming months. Sony's legal team has defended the proposal as a "responsible innovation" aligned with modern financial needs, though they have declined to comment on the ICBA's specific criticisms. As the debate unfolds, the outcome could shape the regulatory framework for crypto banking in the U.S., with far-reaching implications for both corporate and community banks.