Stablecoin Bank Charters: The Battle Reshaping US Banking

Stablecoins are dominating the narrative in digital assets right now.

Last week alone, roughly half of my coverage on the business of tokenization and digital assets involved stablecoins.

One particularly important but largely underreported development in the stablecoin space has been the granting of national trust bank charters by the Office of the Comptroller of the Currency (OCC) to stablecoin and digital asset firms.

Such stablecoin trust bank charters would allow these firms to:

• manage stablecoin reserve assets

• provide crypto and general custody

• offer staking services

• operate core payment infrastructure

• transfer agent services

  
  

In effect, this would allow crypto firms to operate inside the U.S. banking perimeter.

The implications for the traditional banking industry are enormous. At stake are trillions of dollars in balance sheet funding and hundreds of billions in revenue across the financial system.

And the banking industry is not taking this lightly.

The Bank Policy Institute (BPI), which represents 40 of the biggest US lenders including JP Morgan, Goldman Sachs and Citigroup, is understood to be weighing its legal options after the Office of the Comptroller of the Currency (OCC) failed to heed repeated warnings from influential banking groups and state regulators over its reinterpretation of federal licensing rules.

In this Tokenization Market Insight note, I will cover:

1. What is at stake economically

2. Why a potential lawsuit from the banking industry matters

3. What happened the last time U.S. banking regulators were challenged in court

Let's dive in.

What is at Stake in the Stablecoin Bank Charter Fight

A major competitive fault line is emerging between banks and crypto-native financial infrastructure providers as stablecoins increasingly push into core banking businesses including: payments, deposits, settlement, custody and liquidity management.

Three economic battlegrounds are particularly important.

1. Deposit Base Competition

   
   

Stablecoins in their current form represent a potential substitute for bank deposits. While the GENIUS Act attempts to frame stablecoins primarily as payment instruments, the go-to-market strategies used by many stablecoin distributors include yield incentives to attract users.

If stablecoins scale widely as transactional balances, they could potentially drain up to $6.6 trillion from U.S. bank balance sheets according to the U.S. Treasury Borrowing Advisory Committee.

I examined this dynamic in detail in Why Tokenized Deposits is a MUST for Banks

2. Liquidity Coverage Ratio (LCR) Implications

Deposits play a central role in banks’ Liquidity Coverage Ratio (LCR) calculations under the Basel III framework. 

Even if stablecoin issuers recycle customer balances back into banks as stablecoin reserves, banks could still face higher runoff assumptions and reduced balance sheet efficiency.

More details can be found in €1.1T Stablecoin's Balance Sheet Cost for Banks

3. Payment Revenue Disintermediation

   
   

As more SME and consumer cross border payment flow shift to stablecoins, full-stack stablecoin payment firms could also capture value across what has historically been a bank-dominated fee stack, including payment processing, treasury services, cross-border settlement and FX conversion.

You can learn more in Stablecoin Card Payments Economics at Scale.

The outcome of the policy, regulatory, and legislative debate around where to draw the line between stablecoin services and banking services will shape the competitive landscape for: transactional banking/payments, deposits, treasury services and lending for decades to come. 

Why Banking Policy Institute’s Potential Suit Matter 

At first glance, the dispute appears to be about whether the OCC should grant banking charters to crypto or fintech firms.

But the real issue is whether the OCC has the authority to reinterpret the statutory definition of “the business of banking” without following the required rulemaking process.

The most durable and legally defensible route is through formal rulemaking under the Administrative Procedure Act (APA).

If the OCC is effectively changing the regulatory definition of the business of banking, by including crypto custody, crypto trading, stablecoin issuance and tokenization infrastructure, then the standard regulatory process would normally involve:

1. Notice of Proposed Rulemaking (NPRM) published in the Federal Register

2. Public comment period (typically 30–90 days)

3. OCC reviews comments and revises proposal

4. Final rule issued with reasoning and legal basis

However, critics argue this process has not taken place.

Instead, the OCC appears to be relying on administrative adjudication, meaning the agency effectively interprets the law through individual charter approvals.

The mechanism typically works as follows:

1. a crypto firm applies for a national bank charter

2. the OCC approves the application

3. the approval letter explains the agency’s legal interpretation

4. that interpretation becomes precedent for future approvals

Historically, this approach has been used for specialized institutions such as trust banks, payments banks and limited-purpose financial institutions.

However, it becomes controversial when regulators appear to be creating an entirely new class of bank through case-by-case approvals.

The BPI’s concern is shared by other industry associations. 

The Conference of State Bank Supervisors, which represents banking regulators from all 50 U.S. states, warned in a letter to the Office of the Comptroller of the Currency last month that granting national charters to crypto and payments companies that ultimately fall outside “core federal banking laws” could undermine competition, weaken consumer protection, and threaten financial stability.

Similar concerns were raised by the Independent Community Bankers of America, which represents roughly 5,000 community banks. The group urged the OCC to reconsider or revise its approach to granting banking licenses to crypto firms, arguing that the current proposal risks creating an uneven regulatory playing field between traditional banks and digital asset companies

What Happened the Last Time a Banking Regulator Was Sued?

This would not be the first time the banking industry has challenged regulators in court.

During the OCC’s fintech charter initiative between 2016 and 2018, state regulators filed lawsuits arguing that the agency lacked authority to grant national charters to firms that did not accept deposits.

In 2019, a federal court ruled against the OCC in a case brought by the New York State Department of Financial Services. The judge held that:

• the National Bank Act requires deposit-taking

• the OCC cannot charter non-depository fintech companies as national banks

The court concluded the fintech charter exceeded OCC statutory authority. 

Notably, there are striking parallels between that dispute and today’s debate over national trust bank charters that also do not involve deposit-taking.

More recently, in 2020, when the Bank Policy Institute and the American Bankers Association sued the Federal Reserve System over its supervisory stress testing framework.

While the result of Fed’s stress test would significantly impact banks capital requirement, the banks argued that Fed’s supervisory stress tests (CCAR / DFAST) operated like a black box.

The lawsuit challenged the Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act Stress Tests (DFAST), arguing that the Federal Reserve’s models functioned as a “black box” that determined binding capital requirements without sufficient transparency.

The central legal argument was again the lack of proper rulemaking procedures.

The lawsuit argues the Fed effectively sets binding capital requirements without following that process.

The lawsuit triggered a major regulatory response.

In 2025 the Federal Reserve proposed reforms to the stress testing framework, including:

• disclosing key models and variables

• allowing public comment on methodologies

• improving transparency of scenarios.

  
  

The parallels with the current situation are notable.

Conclusion

Stablecoins are rapidly evolving from a crypto-native liquidity instrument into a potential financial infrastructure layer for payments, settlement, and capital markets.

As that transition accelerates, the fundamental policy question facing regulators is no longer whether stablecoins should exist. 

The emerging stablecoin charter debate is not merely about crypto regulation. It is about who gets to define the boundaries of banking in the digital asset era.

Banks, crypto firms, and regulators are now competing to define that boundary. And the decisions made in the next few years could shape the economics of payments, deposits, and financial intermediation for decades

Disclaimer: This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.