Community Banks Sue OCC Over Crypto Trust Bank Charters

The Independent Community Bankers of America (ICBA) has sued the Office of the Comptroller of the Currency (OCC), the federal regulator of national banks. The case is pending in the federal district court in Washington D.C. and accuses the agency of exceeding its legal authority by letting crypto companies obtain national trust bank charters. Most ICBA members hold less than $10 billion in assets.

The association wants the court to strike down an OCC rule and its interpretive letter 1176, declare both unlawful, bar the OCC from using them to issue new charters, and vacate the approval granted to Protego Holdings.

What the lawsuit argues

The rule was published on 2 March 2026 and took effect on 1 April. Among other changes, it replaces the term "fiduciary activities" in the licensing regulation with "operations of a trust company and related activities". The OCC says in its own bulletin that the rule "neither increases nor decreases" its chartering authority.

ICBA disagrees. It argues that the 1978 amendment only allows a national bank to be limited to trust business, which means just three kinds of national bank can be chartered: those taking deposits, those serving other banks, and trust banks. Broadening that, the suit says, would create "an enormous gap in financial regulation". ICBA president and CEO Rebeca Romero Rainey said consumers legitimately expect federally chartered banks to carry federal protections, and that digital assets held by crypto firms with national trust charters lack them.

For crypto users, insurance is the key point. Trust banks do not take deposits and are exempt from much federal regulation, and their customers have no deposit insurance. The FDIC has stated that its coverage applies only to deposits at insured banks, not to crypto assets.

Protego and the wider licensing wave

Protego has preliminary approval for four lines of business: custody, a trading platform, a platform where customers lend custodied crypto to other customers, and token issuance. Within three years it must hold at least $15 million in Tier 1 capital and 180 days of operating expenses in liquid assets. The OCC can modify or revoke the approval until a final one is granted. ICBA, which opposed the charter, says the OCC ignored warnings about serious flaws in risk and control functions and a lack of independent oversight.

According to the suit, the OCC under the Trump administration has approved or cleared 21 national trust bank charters, at least 13 of them for crypto firms. It gave conditional approval to five more, including Ripple National Trust Bank, BitGo and Paxos.

On 26 October, after the suit was filed, Ripple announced final OCC approval to launch its trust bank, which will manage reserves for its RLUSD stablecoin and offer digital asset custody. The outcome now hinges on whether the court accepts ICBA's reading of the 1978 law.