America’s community banks have gone to court to stop crypto companies becoming federally chartered banks without, as they see it, the obligations that come with the name.
The Independent Community Bankers of America sued the Office of the Comptroller of the Currency on Friday in federal court in Washington. The complaint targets a rule finalised on 2 March, an accompanying interpretive letter, and one charter in particular.
The rule lets companies obtain national trust bank charters while doing substantial business that is not fiduciary, which includes crypto custody, trading and issuance. The ICBA says Congress never gave the regulator that power. Before the change, it argues, the OCC had never chartered a national bank that neither took deposits nor acted as a fiduciary.
Rebeca Romero Rainey, the group’s president, called the charters a side door into the banking system. Holders skip Community Reinvestment Act duties, consolidated supervision, bank capital and liquidity standards, and deposit insurance.
The test case is Protego Holdings, which won conditional approval in February. The ICBA notes that Protego laid off most of its staff in 2023 and had court judgments entered against it over unpaid vendor bills. The suit asks the court to vacate that approval.
Protego is the weakest name on a long list. Decrypt reports that Circle, Ripple, Paxos, Fidelity, BitGo, Kraken’s parent Payward, Block and World Liberty Financial all have applications pending or approved.
The OCC has not yet answered in court, and the open question is scope. A ruling confined to Protego would cost the industry little. One that struck down the March rule would put every charter granted under it in doubt, and the complaint does not say what should happen to those.
