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What authority dispute did the lawsuit raise?

The debate over the crypto trust license has now reached the courts in the United States. The Independent Community Bankers of America (ICBA) filed a lawsuit in federal court on Friday against the Office of the Comptroller of the Currency (OCC), the agency that charters federal banks, arguing that it exceeded its legal authority by granting crypto companies national trust-bank status.

According to ICBA’s filing, the OCC is creating a new licensing category that the National Bank Act does not explicitly allow, while bringing these firms into the U.S. banking system without subjecting them to the full set of supervisory obligations faced by community banks. The banking group said this puts smaller lenders at a serious competitive disadvantage.

The OCC declined to comment on the lawsuit. A spokesperson told CoinDesk that the agency does not discuss ongoing legal proceedings.

Why are banks objecting?

ICBA argues that crypto firms are benefiting from the credibility that comes with a federal banking designation, while not being held to the same requirements as traditional community banks on issues such as capital, liquidity, supervision and Federal Deposit Insurance Corp. (FDIC) coverage. The group says Congress never intended national trust status to serve as a “back door” into the banking system for crypto companies.

The challenge follows ICBA’s criticism last month of the Digital Asset Market Clarity Act, which failed to advance in the U.S. Senate. The banking group said the stablecoin provisions in particular did not provide enough protection for deposit accounts at the center of their business models.

The licensing pipeline for crypto firms is widening

The OCC has recently issued a series of trust licenses to crypto-focused firms. Although their business models differ from those of traditional community banks, the licenses allow them to move closer to banking and payments infrastructure.

  • Crypto-focused banking startups include Protego and Erebor.
  • Among existing crypto companies, Coinbase, Circle and Crypto.com are also seen as major players in this space.

What could this mean for the market and regulation?

The dispute goes beyond licensing and also concerns the terms under which crypto companies can enter the regulated financial system. Banking regulators had viewed renewed interest in national trust licenses as a sign that new banking names could be returning to the system after a long period of stagnation.

Recent approvals have also included World Liberty Financial, which is partly owned by Donald Trump and his family. That decision drew criticism from opponents including Democratic Senator Elizabeth Warren. Last month, the OCC also granted a full national bank charter to blockchain bank OpenReserve Bank, backed by investors including Andreessen Horowitz, Jump Capital and Coinbase Ventures.

The outcome of the case could set a precedent for which licenses crypto companies can access for bank-like activities in the U.S. and how that may reshape competition.

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