Wall Street Banks Weigh Lawsuit Over Crypto Banking Charters

The Bank Policy Institute, which represents Wall Street heavyweights including JPMorgan Chase, Goldman Sachs, and Citigroup, is mulling a lawsuit against the Office of the Comptroller of the Currency over its push to hand federal banking charters to crypto and fintech firms.

It arrives after the OCC, led by Jonathan Gould, a Trump appointee and former crypto executive, effectively lowered the bar for crypto and fintech companies to obtain national trust bank charters, granting them the right to operate across all 50 states, according to a report by The Guardian, which cited a source familiar with the matter.

Circle, Ripple, Paxos, Crypto.com, and the Trump-linked World Liberty Financial are among those that have filed or received conditional approvals.

Banks reportedly say the OCC’s reinterpretation allows firms to operate with bank-like powers without the full regulatory burden that traditional lenders face. 

Last October, the BPI warned that “allowing firms to choose a lighter regulatory touch while offering bank-like products could blur the statutory boundary of what it means to be a ‘bank,’ heighten systemic risk and undermine the credibility of the national banking charter itself.”

“The incumbents’ lawsuit talk is less a principled objection to bringing crypto under supervision and more a protest against a two-tier system where newcomers enjoy a clean, modern charter while legacy institutions remain shackled to every bolt-on rule written since the 1930s,” Joshua Chu, a lawyer and co-chair of the Hong Kong Web3 Association, told Decrypt.

Chu warned the U.S. approach to crypto bank charters could strain regulatory oversight and damage credibility if global standards are not incorporated, saying the move risks “hard-wiring tomorrow’s enforcement and credibility crisis into today’s chartering decisions.”

“It is ironic that for decades the U.S. has leveraged AML rules, dollar dominance, and its grip on correspondent banking to strong-arm other jurisdictions into tightening their regimes under the banner of FATF ‘best practice,’” he said. “Yet FATF mutual evaluations have repeatedly flagged U.S. deficiencies, and that gap is increasingly being seen as a strategic risk to its financial reputation and leverage.”

When Kraken secured a Federal Reserve master account from the Kansas City Fed earlier this month, becoming the first crypto bank ever to do so, the BPI immediately accused the Fed of jumping ahead of its own process. 

The American Bankers Association has also waded in, urging the OCC last month to slow its charter approvals while stablecoin and digital asset regulatory frameworks remain unfinished. 

Pointing to the collapses of FTX and Celsius in 2022, the ABA warned the OCC to “be patient, not measure its application decisioning progress against traditional timelines.” 

Last year, the Independent Community Bankers of America warned that the plan would create “a significant loophole in a foundation principle of bank regulation” and had previously opposed Coinbase’s charter bid as “an impermissible reinterpretation” of federal law.

Meanwhile, Gould told the Blockchain Association’s policy summit last October that efforts to block crypto custody from the federal system were “a recipe for irrelevance,” defending more than $2 trillion in existing digital custodial activity at national trust banks. 

Decrypt has reached out to the BPI and the OCC.