U.S. Community Banks Oppose Coinbase Trust Charter Approval

• U.S. community banks oppose the Coinbase trust charter, citing regulatory gaps and risks.
• Coinbase says it will not take deposits or operate as a traditional commercial bank.
• Stablecoin yield dispute delays Clarity Act progress in Senate committee.

U.S. community banks have opposed the conditional approval granted to Coinbase by the Office of the Comptroller of the Currency (OCC), arguing that the decision raises regulatory and financial stability concerns.

The objection, led by the Independent Community Bankers of America (ICBA), follows the OCC’s approval of Coinbase’s application to establish a national trust bank after a six-month review process. The move places the crypto firm within a federally supervised framework for custody and related services, but it has also intensified tensions between traditional banking groups and digital asset companies.

Banks Cite Regulatory Gaps and Risk Concerns

The ICBA stated that Coinbase’s application does not meet expected standards in key areas, including risk controls, profitability, and resolution planning. The group also argued that the OCC lacks clear statutory authority to extend trust banking powers to crypto-related activities without applying the full set of banking regulations.

In addition, the Americans for Financial Reform Education Fund criticized the approval, warning that it departs from established banking law. The group said the decision could expose the financial system to risks linked to crypto market volatility, fraud, and money laundering.

Banking organizations have further raised concerns that nonbank entities are increasingly seeking access to the benefits of U.S. bank charters without meeting equivalent regulatory obligations. Earlier objections from industry groups, including the American Banking Association, pointed to governance and oversight weaknesses in Coinbase’s structure.

Coinbase Clarifies Scope of Its Charter

Coinbase stated that the trust charter will allow it to operate its custody and market infrastructure business under federal oversight. The company pointed out that it does not intend to function as a traditional commercial bank, noting it will not accept retail deposits or engage in fractional reserve lending.

The dispute comes along with broader disagreements over stablecoins and their role in the financial system. Brian Moynihan, Bank of America CEO, previously warned that interest-bearing stablecoins could shift as much as $6 trillion in deposits away from banks, potentially affecting lending capacity and borrowing costs.

This issue is also influencing discussions around the Digital Asset Market Clarity Act. While Coinbase has participated in policy discussions, disagreements over stablecoin rewards remain unresolved. The ongoing debate has delayed progress in the Senate Banking Committee, leaving broader efforts to establish a federal framework for digital asset oversight still pending.

Related: Coinbase Loss, Clarity Act Delay Highlight Strains Between Crypto Firms and Banks