Community Banks Sue OCC Over Trust Charters for Crypto Firms

Community banks in the US have filed a lawsuit against the Office of the Comptroller of the Currency (OCC) over a rule that allows cryptocurrency companies to obtain trust charters without facing the same regulatory scrutiny as traditional lenders. The Independent Community Bankers of America (ICBA) claims that the OCC's March 2 final rule, tied to Interpretive Letter No. 1176, gives crypto firms a 'side door' into the national banking system.

According to the ICBA, trust charters allow crypto-linked entities to claim the prestige of a federal bank charter while avoiding deposit insurance, CRA obligations, and capital and liquidity rules that constrain insured banks. The association's president and CEO, Rebeca Romero Rainey, stated that 'Congress did not create the national trust charter as a side door into the banking system for crypto firms seeking the credibility of a federal bank charter without the Community Reinvestment Act obligations, consolidated supervision, capital and liquidity standards, and FDIC insurance that apply to insured depository institutions.'

The OCC has framed the rule as a clarification of its longstanding authority for national banks limited to trust-company operations and related activities. However, community banks argue that this change would allow crypto firms to engage in non-fiduciary work alongside fiduciary services, which is not in line with the intended purpose of trust charters.

The lawsuit lands amid a broader push to bring digital-asset firms closer to the regulated banking perimeter. The SEC has recently outlined paths for advisers and funds to custody crypto assets, and community banks say they are not opposed to innovation, but they want crypto entrants held to the same federal standards that already bind insured depository institutions.