ICBA urged the OCC to deny Coinbase’s application for a national trust bank charter for its subsidiary, Coinbase National Trust Co.
Details: In its letter, ICBA urged the OCC to deny the application on multiple grounds, each of which is disqualifying under the OCC’s statutory chartering standards:
The application fails to meet the requirements for approval of a national bank charter under the National Bank Act and the OCC’s own regulations and standards.
CNTC proposes to rely on Coinbase’s demonstrably flawed risk and control functions while operating under a governance structure that prevents independent oversight.
With its narrow concentration in specific types of digital asset custody, CNTC would struggle to achieve and maintain profitability during crypto bear markets when the similarly concentrated Coinbase would be least able to provide support.
The OCC’s untested receivership framework would struggle to resolve an uninsured institution of CNTC’s proposed scale and operational complexity, particularly given the technical challenges of crypto custody.
Background: According to the application, CNTC will offer storage of digital assets; hold customer fiat funds and digital assets in an omnibus wallet; enable clients to access staking, financing, and trading services offered by other Coinbase entities; and explore the launch of other digital asset products.
More ICBA Advocacy:
A recent ICBA blog post says a sudden influx of applications from nonbank financial technology firms for national bank trust charters requires the OCC to change course.
ICBA and other groups recently urged the OCC to postpone the consideration of applications to form Ripple National TR Bank, Fidelity Digital Assets, and others, citing significant policy and legal questions over the applicants’ fiduciary activities and the departure from OCC precedent that these applications represent.
In a previous letter, ICBA urged the OCC to keep in mind several key principles when considering charter applications from digital asset providers, including their unique risks and need for sufficient supervisory and regulatory safeguards.
In a national news release, ICBA President and CEO Rebeca Romero Rainey noted trust banks are not required to meet the same kinds of regulatory and capital standards that apply to federally insured full-service banks.
ICBA opposed Circle’s application for a national trust bank charter, noting it would allow the proposed First National Currency Bank to offer deposit-like services without adequate regulatory oversight while exposing the banking system to deposit drainage and increased fraud.
