Key Takeaways
- A number of banking industry groups have challenged Ripple’s and Circle’s bids to obtain bank charters.
- The groups are asking the OCC to avoid making a major policy shift without a transparent and formal rulemaking process.
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Top American banking groups are pressing the OCC to delay action on trust bank applications by Ripple, Circle, and others until full business plans are disclosed and stakeholders have a meaningful opportunity to review and comment on the policy implications.
Ripple and Circle are among several digital asset companies that have submitted applications to establish federally regulated national trust banks in the US.
Circle, following its IPO, applied for a license to manage USDC reserves and institutional crypto assets.
Ripple soon followed, filing to oversee its stablecoin operations and expand its services under OCC oversight. Their proposed entities are First National Digital Currency Bank and Ripple National Trust Bank, respectively.
However, five major banking organizations — the American Bankers Association, America’s Credit Unions, Consumer Bankers Association, Independent Community Bankers of America, and National Bankers Association — contend that these business models fail to meet the legal requirement for national trust banks to primarily engage in fiduciary activities.
In a joint letter dated July 17, the groups stated that approving the pending applications would set a precedent where custody and payments services become the basis for granting a trust bank charter.
The potential shift, they warn, could create a regulatory loophole, enabling non-bank entities to access the benefits of a national bank charter without being subject to the full scope of regulatory oversight that applies to traditional banks.
“The suitability of the trust charter for the Applicants is a material question of public policy,” the letter states. “Granting these Applications could represent a fundamental departure from existing OCC precedent, and the Associations firmly believe that such a departure demands public input.”
The groups urge the OCC to delay any decisions until the public has had a chance to review more complete information about the applicants’ business models and the broader implications of granting such charters.
“A postponement would allow time and, hopefully, sufficient information for the public to meaningfully assess the applications and the novel issues they present,” the letter notes.
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