OCC grants national trust charters to five crypto firms

Key insight: The Office of the Comptroller of the Currency approved national trust charter applications for First National Digital Currency Bank, Ripple National Trust Bank, BitGo Bank & Trust, Fidelity Digital Assets, and Paxos Trust Company. 

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Supporting data: The five approvals announced Friday are only a portion of more than a dozen similar national trust charter applications that have been filed with the agency since the beginning of the year. 

Forward look: Bank groups are likely to oppose the move, as they’ve opposed the agency’s interpretation of the statute that allows crypto firms to take deposits without FDIC-insurance — an interpretation set out by Comptroller of the Currency Jonathan Gould in 2021 when he served as OCC General Counsel. 

The Office of the Comptroller of the Currency on Friday conditionally approved charter applications granting national trust banking charters to the digital-asset arms of First National Digital Currency Bank, Ripple National Trust Bank, BitGo Bank & Trust, Fidelity Digital Assets, and Paxos Trust Company.

The license allows the firms to conduct non-fiduciary activities under interpretive letter 1176, authored in 2021 by now-Comptroller of the Currency Gould, who was serving as the agency’s general counsel at the time. That letter permitted trust banks to engage in “activities that are non-fiduciary in nature, such as non-fiduciary custody.”

“New entrants into the federal banking sector are good for consumers, the banking industry and the economy,” Gould said, in announcing the move. “They provide access to new products, services and sources of credit to consumers, and ensure a dynamic, competitive and diverse banking system. The OCC will continue to provide a path for both traditional and innovative approaches to financial services to ensure the federal banking system keeps pace with the evolution of finance and supports a modern economy.”

The approvals mark a wave of new, large entrants into the trust charter, which has historically acted as a niche designation in the financial marketplace, often conducting custodial services like trust and estate management. The designation would give the firms many of the benefits full banks enjoy, like the option to apply for a coveted Federal Reserve master account, giving direct access to the Fed’s payment settlement rails.

“Establishing a national digital currency trust bank of this kind deepens Circle’s longstanding commitment to the highest standards of trust and compliance,” said Jeremy Allaire, Co-Founder, Chairman, and CEO of Circle. “As a public company, we’re focused on operating under rigorous regulatory oversight and building the infrastructure that allows digital dollars like USDC to become a core part of global finance. This important milestone will give the world’s leading institutions greater clarity and confidence to build on Circle’s platform as stablecoins and blockchain technology move rapidly into the mainstream.”

The agency has received over a dozen new bank charters this year, including from heavy-hitting crypto firms like Coinbase, Ripple and Paxos, though Coinbase’s application is still pending. Erebor bank received conditional approval in November after it applied in June. Gould has repeatedly said the wave of applications is not only welcome, but healthy for the banking industry and a return to form for the OCC.

Critics of allowing fintechs to gain national trust charters — chiefly banking banking advocates — have argued the move grants crypto and fintech firms competitive advantages without the same oversight, FDIC insurance coverage for consumer funds, or the explicit congressional mandate that traditional banks face. Fintech advocates say that national trust charters don’t create loopholes but instead promote competition and innovation.

Banks also worry major stablecoin adoption could undermine their ability to fund local lending. An estimate from the Treasury predicts that stablecoins could grow to over $6 trillion in volume, a tectonic shift in the financial system that banks fear would pull primarily from bank deposits, reducing banks’ profitability and their ability to drive economic growth. 

In July, the American Bankers Association sent a letter to the OCC urging the agency to pause its review of these applications pending a broader review of whether these applicants’ business plans align with the purpose of the national trust charter.