Community Banks Sue OCC Over Crypto Trust Bank Charters

The lawsuit, which also named Comptroller Jonathan Gould, challenged the agency’s authority to charter cryptocurrency companies that neither take deposits nor primarily perform traditional fiduciary functions as national trust banks. The suit also challenged a March OCC rule, a 2021 interpretive letter and the agency’s conditional approval of a charter for crypto firm Protego Holdings.

According to a Monday (Oct. 5) analysis by law firm Ballard Spahr, the case puts a new legal front on a broader dispute between traditional banks and the crypto industry over what banks have long characterized as an uneven regulatory playing field. Community banks face deposit-insurance assessments, Community Reinvestment Act requirements, capital and liquidity rules and other federal obligations that do not necessarily apply to non-depository national trust banks.

At issue is Section 27(a) of the National Bank Act, which says a national bank is not illegally constituted simply because the OCC limits its operations to those of a “trust company and activities related thereto.”

The OCC interprets that language broadly, per Ballard. In March, it amended its regulations to replace references to national trust banks being limited to “fiduciary activities” with the broader statutory language. The agency maintains Congress deliberately used “trust company” rather than “fiduciary,” allowing national trust banks to conduct non-fiduciary activities.