U.S. Bank Group Sues OCC Over Crypto Trust Charters
A U.S. community bank group has sued the OCC over crypto trust charters, arguing that the agency is allowing businesses beyond the limits Congress authorized under banking law.
Key Takeaways
- ICBA challenges the OCC’s trust charter authority.
- Protego’s conditional approval is also targeted.
- Crypto holdings remain outside FDIC deposit insurance.
The Independent Community Bankers of America filed the case on October 2 in the U.S. District Court for the District of Columbia. In its official announcement, ICBA accused the Office of the Comptroller of the Currency of granting crypto businesses the credibility of a federal bank charter without the same obligations that apply to community banks.
The group wants the court to invalidate the OCC’s March 2026 chartering rule and its 2021 Interpretive Letter 1176. Its challenge also targets Protego’s conditional approval, making a proposed crypto trust bank a specific test of the agency’s interpretation of the National Bank Act.
Can a trust charter cover business beyond fiduciary services?
Trust banks hold and administer assets for customers, but those services do not always involve the same responsibilities. A custody arrangement may provide safekeeping without giving the custodian the discretionary responsibilities of a trustee administering assets for beneficiaries. Other custody arrangements can involve fiduciary duties.
That distinction is central to the case. ICBA argues that allowing firms to conduct substantial non-fiduciary business through a national trust charter goes beyond what Congress authorized. It also objects to the difference between the regulatory obligations of these institutions and those of traditional community banks.
“Congress did not create the national trust charter as a side door into the banking system,” ICBA President and CEO Rebeca Romero Rainey said.
The OCC says it is clarifying authority it already has. Its chartering bulletin explains that the rule replaces references to fiduciary activities with wording covering trust company operations and related activities. The change took effect on April 1, and the final rule cites the agency’s history of chartering trust banks that provide non-fiduciary custody as support for that position.
These documents set out the OCC’s reasoning before the lawsuit. Reuters reported that the agency declined to comment on the litigation itself.
Protego’s planned services extend beyond safekeeping
Protego’s application illustrates how several crypto services can operate alongside custody under this interpretation. The OCC’s February 13 approval letter concerns National Digital Trust Company, a proposed Protego Holdings subsidiary. Customers would be able to trade custodied assets and participate in lending and borrowing arrangements, while another platform would support customer-directed token issuance.
The OCC attached capital and liquidity conditions to that approval. During its first three years of operation, the proposed bank must maintain at least $15 million in tier 1 capital, a measure of core capital. It must hold the greater of half its tier 1 capital or $7.5 million in eligible liquid assets, plus a separate amount covering 180 days of operating expenses.
The February letter grants only preliminary conditional approval; the proposed bank must satisfy the preopening requirements and obtain final authorization before beginning business. These requirements establish that the approval carries safeguards, while leaving the court to consider whether the OCC had legal authority to grant it under this framework.
A bank charter does not insure the Bitcoin in an account
For customers, an institution’s federal supervision and the insurance status of their holdings are separate matters. The Protego conditions show how a regulator can impose financial safeguards on a custodian without making the assets it holds for customers eligible for deposit insurance.
The FDIC explicitly excludes crypto assets from deposit insurance. Holding Bitcoin with a bank therefore does not give it the protection available to an eligible cash deposit at an FDIC-insured institution.
The SEC is considering a separate custody framework
Investment firms face another set of requirements when arranging custody for clients. The SEC’s October 1 proposal, explained in our coverage of its proposed crypto custody rules, would accommodate qualifying state trust companies and allow adviser self-custody in specified circumstances. It concerns advisers and funds under securities law; ICBA’s lawsuit concerns the OCC’s authority to charter national trust banks.
What the lawsuit could change
Filing the case does not itself revoke a charter. ICBA is asking for court orders against both the broader chartering framework and Protego’s approval, so the consequences would depend on which requests, if any, the court grants.
A ruling against the rule or interpretive letter could affect the legal basis for other applications using the same approach. A decision confined to Protego’s approval would have a narrower reach. For crypto firms planning to operate as national trust banks, that scope will determine whether the case changes one proposed institution or the licensing route they hope to use.
This article is for informational purposes only and does not constitute legal or investment advice.
Kosta has reported on cryptocurrency markets and blockchain infrastructure since 2020, bringing over six years of hands-on experience in the crypto industry built through daily tracking of markets, trends, and emerging blockchain developments. Specializing in Bitcoin on-chain analysis, institutional ETF flows, and digital asset price action, his work at Coindoo has been cited by other news agencies and consistently covers market developments with a focus on data-driven reporting across Bitcoin, Ethereum, Solana, and XRP. Over the years, Kosta has contributed to multiple crypto media outlets in different regions, authoring over 6,000 articles across the sector. His reporting spans cryptocurrency markets and the broader fintech industry, tracking not only price action but also the technological and regulatory forces shaping the ecosystem. To support his analysis, Kosta actively leverages on-chain data and metrics from leading platforms such as Santiment, Glassnode, and CryptoQuant, enabling deeper, evidence-based market insights. He believes in the power of transparency and the data that underpins the blockchain ecosystem. His academic background in Marketing Management from Denmark further complements his analytical approach, adding a strong understanding of communication strategy and content positioning to his work.
