Major banking groups in the United States, including the American Bankers Association (ABA), the Independent Community Bankers of America (ICBA), and others, have expressed their opposition to the approval of banking licenses for companies like Ripple National TR Bank and Circle's digital asset initiatives.
In a recent letter to the Office of the Comptroller of the Currency (OCC), these organizations requested a delay in the review of applications, arguing that the public has not been provided with sufficient information to adequately assess potential risks.
The associations specifically highlighted the lack of transparency in the public information of the applications submitted by these cryptocurrency companies. They stated that the available information was insufficient for the public to fully understand the business models of these companies seeking a national trust charter. This lack of clarity, according to banking groups, hinders meaningful public participation during the comment period.
Questions about the fiduciary activities of Ripple and Circle
A key issue raised by banking associations is whether companies like Ripple and Circle can meet the fiduciary requirements typically associated with national fiduciary banks. According to U.S. legislation, fiduciary banks are expected to engage primarily in fiduciary activities, such as managing trusts and estates.
Banking associations argue that cryptocurrency companies, which primarily provide digital asset custody services and other related activities, do not meet these fiduciary criteria.
According to OCC guidelines, custody services are not considered fiduciary activities. Banking groups argue that granting banking licenses to companies offering services such as digital asset custody would represent a significant deviation from established policies and set a precedent that could affect the banking system as a whole.
The associations also pointed out that without a clear understanding of the business models of the applicants, it is difficult to assess how their operations will align with the responsibilities of a national fiduciary bank.
Banking coalitions have emphasized increasing transparency in the OCC's assessment. They have demanded clearer data on the business plans of Ripple, Circle, and other cryptocurrency companies aspiring to become banks and to which national banking licenses are being offered. They also called for an extension of the comment period to allow stakeholders sufficient time to carefully analyze the proposals.
The letter emphasizes that proceeding with the issuance of national fiduciary charters by companies that do not primarily engage in fiduciary business would substantially change the regulatory environment.
According to the associations, this policy shift cannot be implemented without public examination and consultation. They have ordered the OCC to postpone its conclusion until more information is presented.
Possible impact on the U.S. banking system.
If the OCC were to grant national banking licenses to cryptocurrency companies without fiduciary activities as the basis of their business models, it could set a precedent that other companies might follow. According to banking groups, this could represent a significant threat to the U.S. financial system.
They believe this could create a scenario where those who are normally not members of the banking system could begin to provide similar services to those offered by national banks, but without the same regulatory scrutiny.
The associations have also indicated that granting national trust charters to cryptocurrency companies would undermine the integrity of the banking system. They argue that companies with few fiduciary operations could gain a harmful competitive advantage, and the resulting gap in regulatory oversight could endanger the monetary system.
