ICBA Sues OCC to Stop Alleged Fast-Track of Crypto Bank Charters

Independent Community Bankers of America sued the Office of the Comptroller of the Currency, alleging that the regulator authorized cryptocurrency firms to enter the banking system without being subject to the same scrutiny as community banks, according to a Friday (Oct. 2) press release from the association.

The lawsuit centers on the OCC’s March 2 final rule related to Interpretive Letter No. 1176. The lawsuit says the rule and the guidance attempt to provide the OCC with new powers to charter national banks that are not authorized by the National Bank Act. It asks a federal court to find both the final rule and the letter unlawful, according to the release.

“The OCC’s decision to allow companies to obtain national trust bank charters to conduct substantial non-fiduciary activities exceeds the authority Congress granted the agency,” ICBA President and CEO Rebeca Romero Rainey said in the release. “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 did not immediately reply to PYMNTS’ request for comment.

When issuing the National Bank Chartering final rule, the OCC said it clarifies “the longstanding authority of national banks limited to the operations of trust companies and activities related thereto to engage in non-fiduciary activities in addition to their fiduciary activities. The final rule would neither expand nor contract the OCC’s authority to charter a national bank.”

A Bank Policy Institute executive responded to ICBA’s suit against the OCC by saying that novel entities should be subject to the same scrutiny as other chartered institutions.

“As we’ve said in comments filed on numerous national trust bank charter applications, BPI supports efforts to bring innovative new products and services into the regulated banking ecosystem, provided that the entities engaging in those activities are subject to the same rules and responsibilities as every other chartered institution engaging in the same activities,” Paige Pidano Paridon, executive vice president and co-head of regulatory affairs at BPI, said in a Friday statement. “Companies should not receive trust charters unless they plan to limit their operations to genuine trust activities. If they want to engage in traditional banking activities, they should seek full-service banking charters.”

PYMNTS reported March 2 that the OCC said its amendment to the final rule is intended to eliminate potential confusion created by earlier regulatory text and to align its rule more closely with the National Bank Act.

The OCC has long supervised national trust banks, many of which conduct non-fiduciary custody and safekeeping activities in addition to fiduciary services, the report said.

“By explicitly referencing ‘operations of a trust company and activities related thereto,’ the rule confirms that trust-chartered national banks are not confined solely to traditional fiduciary function, which in turn offers a bit of runway for an expanded scope of activities,” the PYMNTS report said.