Traditional Banks Challenge Crypto's Quest for Regulatory Legitimacy

The Independent Community Bankers of America (ICBA) has intensified its opposition to Coinbase's application for a national trust bank charter, framing the move as a strategic effort by traditional banks to protect their market dominance rather than advance consumer interests. In a letter to the Office of the Comptroller of the Currency (OCC), the ICBA argued that Coinbase's proposal includes "untested" risk management practices and would struggle to remain profitable during crypto market downturns, according to Cointelegraph. Coinbase's chief legal officer, Paul Grewal, responded by accusing the banking group of prioritizing "regulatory moats" over innovation, stating, "Imagine opposing a regulated trust charter because you prefer crypto to stay... unregulated," according to LookOnChain.

The debate underscores broader tensions between crypto firms and traditional financial institutions seeking to define the regulatory landscape for digital assets. Coinbase's application, filed in October 2023, aims to create the Coinbase National Trust Company, a noninsured entity designed to expand its custody services for both fiat and crypto assets, according to eMarketer. The ICBA's critique highlights concerns about the OCC's ability to safely resolve a crypto-focused trust during systemic stress, citing the lack of a tested receivership framework for such entities, as reported by American Banker. Meanwhile, Coinbase has emphasized that its application does not seek to become a bank but rather to bridge crypto and traditional finance under existing legal frameworks, according to Blockonomi.

The regulatory battle unfolds against a backdrop of shifting Fed policies. A recent U.S. 10th Circuit Court of Appeals decision upheld the Federal Reserve's denial of a master account for Custodia Bank, a crypto-focused institution, reinforcing the central bank's authority to prioritize financial stability over access, according to TradingView. Fed Governor Christopher Waller has proposed a compromise: "skinny master accounts" for fintech and stablecoin firms, which would grant limited access to the Fed's payment systems under strict conditions, according to CryptoNews. This approach could pave the way for crypto firms to integrate with traditional infrastructure while mitigating systemic risks.

Coinbase's recent financial performance and strategic moves further illustrate its push into traditional finance. The exchange reported $1.9 billion in Q3 2025 revenue, with a net income of $432.6 million, driven by rising transaction volumes and expanded asset offerings, as reported by NewsBTC. Additionally, Coinbase is nearing a $2 billion acquisition of BVNK, a stablecoin platform, to enhance its corporate payment solutions, according to CoinPedia. These developments align with its broader strategy to leverage regulatory clarity, as seen in its advocacy for the pending U.S. crypto market structure bill, CoinPedia reported.

The OCC's review of Coinbase's trust charter application could take up to 18 months, with similar applications from Ripple, Circle, and others also pending, as eMarketer reported. Comptroller Jonathan Gould has defended admitting compliant fintechs into the banking system, calling it essential for a "level playing field." However, the ICBA and other bank groups continue to challenge the legal and operational viability of crypto charters, arguing that the OCC's interpretive guidance lacks sufficient public scrutiny, American Banker has noted.

As the debate escalates, the outcome will likely shape whether crypto firms can gain federal legitimacy to compete directly with traditional banks-or if regulatory barriers will persist as a tool for incumbents to safeguard their dominance.