ICBA sues OCC over crypto trust bank charter rules

The Independent Community Bankers of America (ICBA) sued the Office of the Comptroller of the Currency (OCC) on Oct. 2, arguing the regulator exceeded its authority by allowing crypto firms to get national trust bank charters. The group says the charters let firms do business beyond managing assets for clients, and asked a federal court to block the OCC’s approach. ICBA’s announcement of the lawsuit says the case was filed in the U.S. District Court for the District of Columbia.

The dispute centers on an OCC rule that took effect April 1. The regulator says the rule clarifies that national trust banks can conduct non-fiduciary activities—work outside managing assets for clients—alongside fiduciary services. The OCC’s summary of the final rule says it applies to all applicants seeking a national bank charter limited to trust company operations and related activities.

What does ICBA want the court to block?

ICBA is challenging both the final rule and OCC Interpretive Letter No. 1176, which describes the agency’s authority to charter national trust banks. The group wants the court to find them unlawful. It says the National Bank Act only lets the OCC charter trust banks that perform trust and related work, and argues the regulator cannot use that charter for firms doing substantial work outside those activities.

The OCC’s rule says it is aligning its regulations with existing law and does not expand or reduce its chartering authority. It says it will review each applicant’s proposed activities case by case. That leaves the court to weigh the regulator’s reading of its authority against ICBA’s challenge.

Why is Protego part of the case?

ICBA is also asking the court to undo Protego Holdings Corp.’s conditional approval for a national trust bank charter. The OCC granted that approval in February, according to ICBA. The group says it had opposed the application, raising concerns about Protego’s risk controls and governance. Those are ICBA’s claims; the lawsuit has not established them as findings by a court.

The broader fight is over what protections come with a national trust charter. ICBA says trust banks that do not take deposits fall outside many federal banking rules, and that their charters can displace some state laws. It argues consumers may assume a federally chartered firm offers the same protections as an insured bank. The case could test how far the OCC can extend trust charters to companies whose work includes crypto custody and other activities beyond traditional trust services.

Sources

• ICBA’s announcement of the lawsuit — icba.org
• OCC’s summary of the final rule — occ.gov