Coinbase CLO: Bank Groups Opposing Trust Charter Bid Engaging in 'Protectionism'
The Office of the Comptroller of the Currency (OCC) faces pressure from banking lobby groups, specifically the Independent Community Bankers of America (ICBA) and Bank Policy Institute (BPI), to deny Coinbase's application for a national trust bank charter, citing systemic, legal, and structural concerns. Coinbase, aiming to expand its financial services, has faced opposition over perceived risks tied to its business model, including governance structure and inter-affiliate dependencies. While Coinbase critiques bank lobbyists for protectionist motives, fearing competition from regulated crypto institutions, banking groups argue that the application lacks transparency and exceeds OCC’s authority. The debate symbolizes a broader conflict between traditional banking and crypto firms vying for federal regulatory legitimacy. Other crypto firms, including Circle and Ripple, are also pursuing similar charters, suggesting a transformative shift in U.S. financial regulation.
Coinbase Faces Opposition in Its Pursuit of a National Trust Bank Charter
The Office of the Comptroller of the Currency (OCC) is under intense scrutiny as Coinbase pushes for a fair path into regulated finance. Two influential banking groups, the Independent Community Bankers of America (ICBA) and the Bank Policy Institute (BPI), have publicly opposed Coinbase's application for a national trust bank charter. These groups argue that approving the application could set a dangerous precedent for the U.S. banking system.
ICBA's Concerns Over Coinbase's Application
The ICBA has urged the OCC to reject Coinbase’s application for its subsidiary, Coinbase National Trust Co., citing systemic and legal risks. According to ICBA, the application fails to meet statutory chartering standards. The group also criticized Coinbase for relying on an interpretive letter issued without public notice, which they claim cannot substantiate non-fiduciary activities. Additionally, ICBA pointed to Coinbase’s "flawed risk and control functions" and a "non-independent governance structure", which they believe make the proposal unsafe for the banking system.
BPI's Legal and Fiduciary Concerns
The BPI emphasized that Coinbase’s approval would exceed the OCC’s authority under federal law unless the company is predominantly engaged in fiduciary activities. The group also requested clarification on whether Coinbase's trust charter would allow management of stablecoins, cautioning that such activities might violate the GENIUS Act’s prohibition on yield-bearing stablecoins.
Coinbase's Defense Against Bank Lobbyists
Coinbase’s Chief Legal Officer, Paul Grewal, criticized the ICBA’s opposition, accusing them of attempting to maintain regulatory protectionism. Grewal tweeted that opposing a regulated trust charter just to keep crypto unregulated demonstrates lobbyists’ intent to protect their interests rather than consumers. He stated, "Bank lobbyists are trying to dig regulatory moats."
Potential Risks Highlighted by Regulators and Industry Observers
Banking groups have raised concerns around Coinbase’s plan to integrate custody with staking, financing, and trading services, warning these could create inter-affiliate dependencies and expose customers to unproven risks in the event of a failure. Jonathan Gould, head of the OCC, addressed these issues by suggesting that while stablecoins represent no "overnight deposit threat," proper regulation could potentially help community banks compete with larger entities.
Shifting Dynamics Between Banks and Crypto Firms
Observers describe Coinbase’s application as a "structural shift" that could significantly alter the landscape of U.S. banking. Ruchir Gupta, co-founder of Gyld Finance, explained that the real concern for banks isn’t crypto volatility, but heightened competition. Gupta stated that if Coinbase gains approval, it will become a federally regulated financial institution, paving the way for others to follow. He also noted that accusations about confidentiality in the application process are mostly tactical rather than substantive.
Broader Implications for the Crypto Industry
Coinbase’s case isn’t isolated, as multiple crypto firms—including Crypto.com, Circle, Ripple, Bridge (Stripe’s stablecoin arm), and Paxos—have either filed or announced similar national trust charter applications. Recent approvals for Erebor Bank and Anchorage Digital highlight how crypto institutions are steadily pushing into federally supervised financial space, despite opposition from traditional banks.