- Traditional banks call for more transparency before crypto firms get national charters.
- Crypto companies argue their licenses will streamline payment processing and custody services.
- Courts of law are in sight as banks argue on whether trust charters are similar to complete banking licenses.
The US banking and credit union coalitions have officially written to the Office of the Comptroller of the Currency (OCC) requesting that it delay its decision-making on crypto companies that have applied to be licensed as banks. The coalition, which involves the American Bankers Association, claims that issuing national bank charters to businesses such as Circle Internet Group, Ripple Labs, and Fidelity Digital Assets will be a serious departure in decades-old banking rules.
These cryptocurrency companies want to be accepted as national trust banks, and, in that case, they will be able to process payments quicker and be under the jurisdiction of the federal government all around the country. The traditional banking organizations, however, argue that the business models of the applicants are incompatible with the nature of fiduciary responsibility traditionally connected with the national trust banks. The banking groups underline that custodial services of digital assets do not involve a fiduciary activity and adopting this new model will threaten the integrity of the US banking industry.
Banks Demand Transparency and Regulatory Clarity
Banks are asking the OCC to give them more disclosures about crypto applicants before approving any charters. They claim that the existing information available in the public is not enough to enable any meaningful assessment or observation regarding the proposed business activities. The groups caution that allowing crypto companies to become national trust banks without seeking to play traditional fiduciary roles would be a significant policy change by the OCC, and it should not be allowed to move forward without a formal public notice and comment period.
The trade associations also express reservations in the letter that acceptance of such charters may set a precedent where a wider group of companies may demand national trust charters, which may rock the stability of finance. They warn that such a basic departure would subject the US banking system to significant risks, particularly since the custodianship of digital assets is unlike the traditional banking activity.
Industry Voices Foresee Legal Battles and Growing Competition
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Caitlin Long, founder of Cryptocurrency-focused bank Custodia Bank, identified the furor on social media, saying the question of whether trust charters could be used as a legitimate bank license, there would inevitably be lawsuits due to the minimal capital requirement and less regulatory burden. She critically noted that in case crypto companies manage to succeed in this strategy, traditional banks will turn into trust companies to avoid more rigorous capital regulations, which will increase competition.
According to Logan Payne, a crypto-regulating attorney, new stablecoin laws spur issuers to apply to acquire national trust bank charters. The charters provide a federal license, which encompasses a wider variety of activities than the issuance of stablecoins, shielding them against obtaining numerous state-level licenses. It is believed that this regulatory incentive will push more crypto companies to seek banking charters increasing their presence in the financial system.
Banks, meanwhile, remain cautious despite regulatory shifts. Large institutions are entering the cryptocurrency services slowly, in many cases restricting their activity to pilot programs or collaborations, until more definitive regulatory guidance. Others have gone as far as considering offering stablecoins or crypto services, but fears remain on the anti-money laundering regulations and regulatory harmonization across the world.