The U.S. banking industry has united in its opposition to the Office of the Comptroller of the Currency (OCC) approach. This opposition targets the regulator's efforts to integrate cryptocurrency companies into the federal banking system.
On December 12, 2023, the OCC conditionally approved national trust bank licenses for five digital asset companies, including Ripple, Fidelity, Paxos, First National Digital Currency Bank, and BitGo. The agency emphasized that crypto companies must also undergo the same “XEM ” process as anyone applying for a national bank license.
The US banking industry challenges the OCC's move.
However, the American Bankers Association (ABA) and the Independent Community Bankers Association (ICBA) argue that the OCC is creating a two-tiered banking system .
Their main argument is that fintech and crypto companies are being granted prestigious national licenses without needing insurance from the Federal Deposit Insurance Corp. (FDIC) or meeting the same Capital and liquidation standards as traditional banks.
These groups argue that the structure is facilitating a form of "circumvention" at the federal level.
Once they obtain national licenses, these crypto companies benefit from federal law taking precedence over individual state money transfer laws. At the same time, they avoid many of the regulatory requirements that insured deposit institutions must comply with.
ABA President Rob Nichols argued that this approval blurs the lines between what constitutes a "bank." He added that this blurring of definition would undermine the credibility of banking licenses.
In his opinion, extending trust rights to companies that do not perform traditional fiduciary duties would create a class of organizations that resemble banks but are not subject to the same oversight as real banks.
In addition, they are concerned about other issues besides competition.
Banking associations warn that consumers may find it difficult to distinguish between insured banks and national trusts holding large amounts of uninsured crypto assets.
They also argued that the OCC has not clarified how it will handle the failure of such an organization, especially when that organization holds billions of dollars in digital assets outside of traditional safety nets.
ICBA wants to temporarily suspend the licenses.
ICBA also directly questioned the legal authority of OCC in issuing these licenses.
This group focuses its criticism on Guidance Letter 1176, which allows trust banks to engage in non-traditional trust activities, such as the custody of stablecoin reserves .
ICBA President Rebeca Romero Rainey called the change a “major policy turning point” and argued that it pushes country trust licenses away from their Capital purpose.
“The OCC has made a sweeping policy shift under Guidance Letter #1176, which deviates from the Vai of traditional trusts and creates an inconsistent legal framework that threatens financial stability – the agency needs to change course,” Ms. Rainey emphasized.
This group argues that the OCC is allowing non-bank fintech companies to “borrow the prestige” of the US banking system while avoiding all the regulations that insured banks must comply with.
Therefore, both associations unanimously called for an immediate halt and the withdrawal of the recent approval decisions.
They warned that the current model could create organizations that the OCC “is not adequately equipped to handle in an orderly manner if problems arise.” They argued this could put traditional banks and the broader financial system at risk.
