The Office of the Comptroller of the Currency (OCC) granted conditional approval for five national trust bank charter applications for nonbank fintechs. The move was met with criticism from community banking advocates concerned about the implications of chartering nonbank institutions.
The OCC conditionally approved applications for de novo national trust bank charters for First National Digital Currency Bank and Ripple National Trust Bank on Dec. 12. The agency also conditionally approved applications to convert the state trust companies BitGo Bank & Trust, National Association; Fidelity Digital Assets, National Association; and Paxos Trust Company, National Association to national trust companies.
Provided the institutions meet specific conditions laid out by the OCC, the institutions will join approximately 60 other national trust banks currently supervised by the OCC, the agency noted in a press release.
“New entrants into the federal banking sector are good for consumers, the banking industry and the economy,” Comptroller of the Currency Jonathan Gould said in a press release. “They provide access to new products, services and sources of credit to consumers, and ensure a dynamic, competitive and diverse banking system. The OCC will continue to provide a path for both traditional and innovative approaches to financial services to ensure the federal banking system keeps pace with the evolution of finance and supports a modern economy.”
Independent Community Bankers of America (ICBA) President and CEO Rebeca Romero Rainey issued a statement expressing opposition to the OCC’s decision to approve the charters in a statement challenging the OCC’s authority to do so and asserting that the recent influx in such charter approvals could be troublesome for the financial industry and for consumers.
“Trust banks are not required to meet the same kinds of regulatory and capital standards that apply to federally insured full-service banks,” she said. “The conditional approvals of five national trust bank charters from the OCC further stretches the national trust bank charter beyond its statutory and historical purpose, endangers consumers, and creates institutions the OCC is not equipped to resolve in an orderly way.”
American Bankers Association President and CEO Rob Nichols said the OCC’s decision raises important questions about the scope and oversight of nonbank fintechs.
“While innovation in financial services can benefit consumers, it is critical that any chartered entity operates under a regulatory framework that appropriately addresses its activities and risks,” Nichols said. “We are concerned that expanding the trust charter in this way, particularly for entities that may not engage in traditional fiduciary activities, could blur the lines of what it means to be a bank and create opportunities for regulatory arbitrage. Clear answers are needed to ensure the public and policymakers understand how these charters will be supervised and how risks will be mitigated.”
The Financial Technology Association (FTA) has asserted that by exercising their chartering authority with respect to fintechs, federal banking agencies (FBAs) provide “direct paths” for bank-fintech arrangements that offer valuable services to consumers.
“Just as important as offering viable paths to fintechs, it is critical that the FBAs and policymakers not inadvertently choke off the ability of fintechs to work with banks or unnecessarily drive up costs in a way that makes innovative consumer products nonviable,” the FTA wrote in a comment letter responding to a request for information on bank-fintech arrangements in October 2024. “This can happen if scrutiny of bank-fintech partnerships chills activity or reduces the number of willing bank partners simultaneously with efforts to prevent fintechs from acquiring existing or novel bank charters.”
The OCC emphasized that it applied the “same rigorous review and standards it applies to all charter applications” when reviewing the five described in its release. These reviews were conducted based on their individual merits, consistent with applicable statutory and regulatory factors.
ICBA noted that it will continue to urge the OCC to pause consideration of these applications, rescind Interpretive Letter No. 1176 – issued in January 2021 to clarify the OCC’s authority to charter national banks limited to trust company functions – and to initiative rulemaking to clarify the scope of such charters and ensure alignment with congressional intent.