US bank lobby urges delay in bank license applications from crypto firms, citing policy risks

The American Bankers Association (ABA) and major credit union groups have called on the Office of the Comptroller of the Currency (OCC) to halt its review of bank license applications from crypto firms, arguing that approvals would mark a “fundamental departure” from traditional banking regulations.

In a letter to the OCC, the groups claimed that stablecoin issuers Circle and Ripple Labs, along with Fidelity Digital Assets, have not provided enough transparency in their applications, raising concerns about systemic risks.

The pushback shows a growing tension between traditional financial institutions and crypto companies seeking federal oversight. If granted, these bank license applications from crypto firms would allow them to operate nationwide without state-by-state approvals—a move banks say could undermine financial stability.

Banking lobby demands transparency in crypto charter approvals

The ABA and credit union associations argue that the public portions of the bank license applications from crypto firms lack sufficient detail for proper scrutiny.

“There are significant policy and legal questions as to whether the applicants’ proposed business plans involve the types of fiduciary activities performed by national trust banks,” the groups wrote.

They contend that granting charters to crypto firms whose primary activities include digital asset custody rather than traditional banking would require a formal public comment period.

“Providing custodial services for digital assets is not a fiduciary activity,” the letter stated, warning that approvals could encourage other companies to seek similar exemptions.

Crypto industry sees “fear of competition” in banking resistance

Caitlin Long, founder of Custodia Bank, called the banking lobby’s opposition an “interesting reaction” in a post on X.

“If what they fear will happen ends up happening, then why wouldn’t banks just convert to trust companies and operate at a fraction of the capital requirements?” she questioned.

Alexander Grieve, head of government affairs at Paradigm, noted the rare unity among banks and credit unions:

“They rarely agree on anything, but they seem to agree that they’re about to face real competition from crypto.”

The OCC has not yet responded publicly, but experts predict more bank license applications from crypto firms will emerge, especially after the recent GENIUS Act created new stablecoin regulations.

Why crypto firms want federal banking status

Logan Payne, a crypto attorney at Winston & Strawn, told Cointelegraph that stablecoin issuers are incentivized to pursue bank license applications from crypto firms because federal charters would eliminate the need for state-level money transmitter licenses.

“A national trust bank charter allows stablecoin issuers to engage in broader activities without navigating 50 different state regimes,” Payne explained.

However, banking groups warn that allowing crypto firms to operate as quasi-banks could introduce “material risk to the U.S. financial system.”

The OCC now faces pressure to either delay approvals or clarify its stance on digital asset custodianship.