Community banks are suing to close the door that the OCC has opened
The Association of Independent Community Banks in the United States has filed a lawsuit against the Office of the Comptroller of Currency and Comptroller Jonathan Gould, challenging the agency's authority to issue trust bank licenses.
10/5/20264 min read
Narrow and specific legal theory
The core argument of the lawsuit is not about cryptocurrency. It is about the number of types of national banks that Congress has authorized. The ICBA understands the National Banking Act to allow three types: deposit-taking institutions engaged in banking, banks that serve other deposit-taking institutions, and trust banks that perform trust duties such as acting as trustees or managing estate assets. They argue that the OCC has no legal basis to authorize a fourth type, that trust banks have limited purposes, neither accepting deposits nor performing trust functions, and that the agency misinterpreted a 1978 amendment to the Act when claiming that authority.
The March 2026 regulation is specific because of what it changed. According to the lawsuit, it replaced language that strictly limited national trust banks to trust activities only with broader language that allows non-trust activities typical of trust companies. The ICBA also argues that the OCC has never before licensed a national bank that neither accepts deposits nor engages in trust activities.
The way the issue is framed is crucial because it's a question the court can answer without taking any opinion on digital assets. The case revolves around interpreting the law, not whether holding cryptocurrency is risky.
Why is this challenge feasible right now?
Two Supreme Court rulings from the 2024 term are the reason this case has a viable path, and they explain the current situation better than anything else happening in the cryptocurrency market. The Loper Bright Enterprises v. Raimondo case overturned the Chevron ruling, ending the doctrine that courts must respect the agency's reasonable interpretation of an ambiguous law they administer. According to Chevron, the OCC's interpretation of the National Banking Act would receive considerable respect from the court, and the ICBA would need to prove that interpretation was unreasonable. Following the Loper Bright case, the court itself decided on the best interpretation of the law. That shift turned a difficult challenge into a winnable one.
The Corner Post v. Board of Governors case ruled that a claim under the Administrative Procedure Act arises when the plaintiff is harmed by the agency's final action, not when the regulation is enacted. That is why a claim filed in 2026 could seek to overturn an explanatory letter from January 2021 and a conditional approval from the same year. Under the previous approach, those cases would fall outside the six-year timeframe.
Overall, these two decisions have made the agency's old interpretations more vulnerable and removed the privilege that protected them. The OCC's cryptocurrency licensing program was built largely on an explanatory letter from 2021, and that is precisely the kind of agency action that those rulings exposed.
The argument for protections is weaker than the argument for statutory protections.
The ICBA argues that cryptocurrency companies holding national trust licenses are not subject to the capital and liquidity standards, consolidated supervision, and FDIC deposit insurance applicable to insured banks, and that digital assets held at such companies are not entitled to these protections.
Part of that argument is a classification error. FDIC insurance protects depositors because deposits are liabilities of the bank, meaning the depositor is an unsecured creditor if the institution goes bankrupt. Trust banks do not take deposits. Assets held as custodians or trustees are off the institution's balance sheet and are structured to avoid bankruptcy risk; therefore, the type of risk that deposit insurance addresses does not arise in the same way. Claiming deposit insurance from a non-deposit-taking entity is claiming a remedy for a risk that its structure does not create.
The points regarding consolidated capital and supervision are more substantive, as custody incidents, operating losses, and parent company difficulties are real risks that a trusteeship license addresses differently from how bank parent company rules address them.
But the association's strongest argument remains its statutory basis. If Congress allows three types and the OCC creates a fourth, then the policy value of that fourth type is no longer important. A court already convinced by the text of the law doesn't need a risk argument, and a court not convinced by the text of the law is unlikely to be swayed by such an argument.
There's also an underlying benefit worth highlighting. ICBA represents community banks, and a federal trust charter allows a cryptocurrency company preferential licensing on a state-by-state basis while competing on custody, payment, and dispute resolution services. The association has previously opposed individual applications from Coinbase. That competitive motive doesn't make the legal argument wrong, but it's why the lawsuit exists.
Assessment and Conclusion
The Senate failed to pass the CLARITY Act on September 15, and Senator Cynthia Lummis warned that the next realistic opportunity to enact comprehensive market structure legislation might not open until 2030. Authorities responded by acting within their own jurisdictions. SEC Chairman Paul Atkins issued an Innovation Exemption two days after the deadlock attempt failed, stating that the agency would act decisively within its statutory jurisdiction whether or not legislation was passed. CFTC Chairman Michael Selig stated that market structure rules would be enacted either through rules or through legislation.
Administrative actions create a target that can be litigated in ways that the law cannot. CME Group sued the CFTC over its approval of Kalshi's Bitcoin perpetual futures contract. ICBA is currently suing the OCC over its charter framework. Both are cases where a incumbent party whose position is threatened by a regulator's unilateral action is asking the court to rule that the regulator exceeded its authority.
That is the structural price of the administrative path Atkins and Selig have chosen. It creates rules faster than Congress, and it creates rules that can be overturned by a single district judge. The ICBA complaint is the first test to see whether that loophole is merely theoretical.
Disclaimer: The content in this article is for informational, research, data analysis, and reference purposes only regarding the cryptocurrency market. All opinions, assessments, forecasts, or opinions reflect the author's perspective at the time of publication and do not constitute investment advice, solicitations for buying or selling, trading recommendations, advertising, marketing, or promotion of any financial products, services, or cryptocurrencies. Mentions of projects, tokens, protocols, exchanges, wallets, or cryptocurrency service providers (CASPs) are for research, analysis, or informational purposes only and should not be construed as endorsements, recommendations, or guarantees in any way. HCCVenture does not broker, advertise, market, promote, or connect users in Vietnam with any cryptocurrency services from CASPs. HCCVenture does not accept asset custody, investment mandates, manage assets, or execute transactions on behalf of clients. All investment decisions are made entirely through the reader's own research (DYOR), evaluation, and responsibility; HCCVenture is not liable for any losses or damages arising from the use of or reliance on the information presented in this article.
Compiled and analyzed by HCCVenture
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