WASHINGTON — The Independent Community Bankers of America sued federal banking regulators Friday over their approval of cryptocurrency companies’ bank charter applications, arguing the moves expose the banking system to risky activities and give crypto firms an unfair competitive advantage.
The lawsuit names the Office of the Comptroller of the Currency and Comptroller Jonathan Gould. It asks a federal court in Washington to overturn a rule finalized earlier this year and related guidance that ICBA says expanded access to national trust bank charters beyond the agency’s legal authority.
Under Gould, the OCC has granted preliminary approval to multiple crypto companies seeking trust charters to hold digital assets and issue stablecoins, cryptocurrencies designed to maintain a fixed value, the Wall Street Journal noted in its report.
As the report explained, trust banks traditionally safeguard assets or provide fiduciary services. They generally do not accept deposits or make loans and are subject to different oversight and financial stability requirements than traditional banks.
The Bankers’ Argument
The ICBA is arguing the OCC’s changes allow crypto companies to offer services that compete with community banks without meeting the same costly regulatory requirements.
The group’s president and CEO, Rebeca Romero Rainey, said Congress did not intend trust charters to provide crypto firms an alternative route into the banking system, according to the Journal.
An OCC spokeswoman declined to comment on the litigation, the Journal reported.
The challenge comes as the Trump administration, congressional Republicans and financial regulators seek to bring digital assets into the mainstream financial system. Gould has advocated embracing financial innovation, pointing to the sharp decline in bank charter applications since the 2008-09 financial crisis, the Journal reported.
Concerns of Smaller Banks, CUs
Credit unions have joined smaller banks in expressing concern that cryptocurrencies and stablecoins could draw away deposits, reducing earnings and lending capacity. A bill to establish a broader crypto regulatory framework stalled in the Senate last month following opposition from banks to certain provisions, according to the Journal.
