US Banks Warn OCC Crypto Charters Could Weaken The Banking System

Core Viewpoint - The US banking industry is challenging the OCC's efforts to integrate cryptocurrency firms into the federal banking system, arguing that it creates a two-tier banking system that undermines traditional banking standards [1][2][3]. Group 1: OCC's Conditional Approval - The OCC has granted conditional approval for national trust charters to five digital asset firms, including Ripple, Fidelity, Paxos, First National Digital Currency Bank, and BitGo, emphasizing that these firms underwent a rigorous review process similar to traditional banks [1]. Group 2: Concerns from Banking Associations - The American Bankers Association (ABA) and the Independent Community Bankers of America (ICBA) argue that the OCC's actions allow fintech and crypto firms to obtain national charters without the necessary FDIC coverage or meeting traditional capital and liquidity standards [2]. - These groups claim that the new structure promotes regulatory arbitrage, allowing crypto firms to benefit from federal preemption of state laws while avoiding compliance obligations that apply to insured banks [3]. Group 3: Implications for Banking Definitions - ABA President Rob Nichols expressed concerns that the approvals blur the lines of what constitutes a bank, potentially weakening the integrity of the banking charter [4]. - There is a fear that expanding trust powers to non-traditional firms creates institutions that resemble banks but lack adequate oversight [4]. Group 4: Consumer Protection Concerns - Banking groups warn that consumers may find it difficult to differentiate between insured banks and national trust institutions that hold large amounts of uninsured crypto assets [5]. - They argue that the OCC has not sufficiently addressed how it would manage the failure of such entities, especially if they hold billions of dollars in digital assets outside the traditional safety net [5].