US community banks sue regulator over crypto trust charters, with echoes for Europe's bank-fintech fight

The Independent Community Bankers of America (ICBA) filed suit against the Office of the Comptroller of the Currency (OCC) on 2 October 2026, in the District of Columbia District Court, arguing that the regulator's approach to chartering crypto firms as national trust banks has opened what it calls an unregulated fourth category of banking in the United States.

At issue is a framework that traces back to an OCC interpretive letter from January 2021 expanding the powers available to national trust banks, later consolidated into a final rule in March 2026 and explained further in Bulletin 2026-4. Since the start of the Trump administration on 20 January 2025, the OCC has authorised 21 national trust banks or neobanks, of which 13 correspond to crypto companies, according to the regulator's own figures.

The ICBA's complaint singles out Protego Holdings as the test case. The firm, which laid off most of its staff in 2023, received conditional approval from the OCC in February 2026 to operate as a National Digital Trust Company. That authorisation permits it to run four business lines simultaneously: custody, trading, lending and token issuance. The ICBA is asking the court to declare the regulatory framework illegal and to void Protego's conditional approval.

Central to the lawsuit is the fact that crypto trust firms chartered under this framework are not required to carry FDIC insurance and are not subject to the Community Reinvestment Act, obligations that apply to traditional community banks. "This vast expansion of power opens an enormous gap in financial regulation," the ICBA said in its filing.

The trade body also points to concrete competitive harm. "Both institutions have already lost hundreds of thousands of dollars in business this year to crypto firms conditionally approved by the OCC," the lawsuit document states, referring to two community banks it cites as evidence. Those same banks, each with assets under $2.5 billion, each spend approximately $1.5 million annually on regulatory compliance, a burden the ICBA argues crypto trust charter holders avoid.

A shrinking slice of deposits

The ICBA frames the dispute against a longer decline in community banking's market position. According to the Federal Reserve Bank of Kansas City, using data as of December 2025, community banks' share of deposits fell from nearly one third in 2000 to less than 14% by the end of last year.

Rebeca Romero Rainey, Executive President of the ICBA, put the group's objection in terms of parity rather than opposition to crypto itself: "Any non-fiduciary firm seeking the benefits of a federal bank charter should be subject to the same requirements as community banking." The Bank Policy Institute has also expressed support, backing the ICBA's position.

The OCC, for its part, has defended its rule as a clarification rather than an expansion of authority. In Bulletin 2026-4 it stated: "The final rule does not expand or contract the OCC's authority to grant charters under the National Bank Act. Instead, it codifies the agency's long-standing interpretation of the activities permitted to national trust banks."

Academic and policy voices are split on how to read that codification. Lee Reiners, a banking law specialist at Duke University, argued the rule "allows the OCC to grant charters to uninsured trust banks that operate substantially in crypto activities, bypassing the regulatory framework that governs traditional banking." Brian Knight, a researcher and fintech expert at the Mercatus Center, took a narrower view: "A national trust bank has never taken deposits or made traditional loans. The rule does not change that reality; what it does is allow the custody of digital assets under the same federal standard applied to any other fiduciary function."

The OCC has until 13 November 2026 to respond to the lawsuit. The dispute arrives as European regulators and banking associations continue to debate how fintech and crypto firms should be treated relative to licensed credit institutions under frameworks such as MiCA, a question the US case puts in sharp, litigated relief.