US credit union and banking associations formally urged regulators to pause license decisions for crypto companies. Crypto firms like Circle Internet Group, Ripple Labs, and Fidelity Digital Assets triggered concerns by applying for national bank charters.
It was addressed to the Office of the Comptroller of the Currency, commonly referred to by the acronym OCC. The American Bankers Association and other trade associations stated the crypto firms’ plans are lacking essential fiduciary elements.
They argue that the provision of custody of virtual assets does not reach the legal requirements of trust banking operation. These firms seek permits to operate nationwide and process payments quickly, similar to traditional banks.
These groups highlighted that the public filings made by the aforementioned crypto companies are not sufficient to reveal the actual business activities of the companies. Without such transparency, the general public will be unable to provide meaningful comment or assess potential regulatory risk.
They stated that any deviation from current fiduciary norms would need to conform with a formal notice and comment process of the public. Banking officials also cautioned that approval of trust bank licenses for crypto-oriented companies would be a dangerous precedent.
Crypto firms may disrupt the banking system
These types of decisions may cause other non-banking companies to obtain the same license with less regulatory intervention. The charter system, if approved, may greatly disrupt the financial structure as well as increase systemic risk.
Founder of Custodia Bank, Caitlin Long, said the issue can be taken to the courts if the regulators push through the crypto trust charters in haste. In her view, trust charters that replace full bank licenses can sidestep the capital and the regulatory requirements.
Bank structure and law can be significantly altered in the wrong direction if trust company regulations are applied in the wrong way. Paradigm government affairs head Alexander Grieve said banks and credit union are not usually aligned in their views.
He believes the alignment spells trouble for mainstream banks because they take new players in the crypto space as serious threats. The worry can escalate if other crypto firms amplify demands for federal recognition.
Logan Payne, attorney, said that the GENIUS Act spurred stablecoin issuers to seek federal charters. The charters are issued to companies that can provide broader services without separate state permits. Legal experts are expecting the further use of the charter, as crypto companies are aiming to grow their national presence.
