The Independent Community Bankers of America (ICBA) filed a lawsuit against the Office of the Comptroller of the Currency (OCC) on October 2 in the U.S. District Court for the District of Columbia, challenging the regulator's authority to grant national trust charters to cryptocurrency firms. In its official announcement, the trade group accused the OCC of extending the credibility of a federal bank charter to crypto businesses without applying the obligations that govern community banks.

The complaint asks the court to invalidate the OCC's March 2026 chartering rule and its 2021 Interpretive Letter 1176. It also targets the conditional approval granted to Protego, making a proposed crypto trust bank a concrete test of the agency's interpretation of the National Bank Act.

Trust charters and the limits of fiduciary authority

Trust banks hold and administer assets for customers, but the responsibilities attached to those services vary. A custody arrangement may involve pure safekeeping, without the discretionary duties of a trustee administering assets for beneficiaries, while other arrangements do carry fiduciary obligations. That distinction sits at the center of the case.

ICBA argues that permitting firms to conduct substantial non-fiduciary business through a national trust charter exceeds what Congress authorized. The group also objects to the gap between the regulatory obligations of such institutions and those of traditional community banks.

"Congress did not create the national trust charter as a side door into the banking system," ICBA President and CEO Rebeca Romero Rainey said.

The OCC defends its authority

The OCC maintains that the rule simply clarifies authority it already possesses. According to its chartering bulletin, the rule replaces references to fiduciary activities with language covering trust company operations and related activities. The change took effect on April 1, and the final rule cites the agency's history of chartering trust banks that provide non-fiduciary custody in support of that position. Because ICBA is challenging both the 2021 letter and the 2026 rule, the litigation reaches the OCC's underlying interpretation as well as its more recent codification of it.

These documents set out the OCC's reasoning before the lawsuit was filed. Reuters reported that the agency declined to comment on the litigation itself.

Protego's planned services extend beyond safekeeping

Protego's application illustrates how several crypto services could operate alongside custody under the OCC's interpretation. The agency's February 13 approval letter concerns National Digital Trust Company, a proposed subsidiary of Protego Holdings. Under the plan, customers would be able to trade custodied assets and take part in lending and borrowing arrangements, while a separate platform would support customer-directed token issuance. For crypto firms, a national trust charter would allow those services to operate within a single federally chartered institution, a framework now at the center of the lawsuit.

The OCC attached capital and liquidity conditions to the approval. During its first three years of operation, the proposed bank must maintain at least $15 million in tier 1 capital, a measure of core capital. It must also hold eligible liquid assets equal to the greater of half its tier 1 capital or $7.5 million, plus a separate buffer covering 180 days of operating expenses.

The February letter grants only preliminary conditional approval. The proposed bank must satisfy preopening requirements and obtain final authorization before beginning business. These conditions demonstrate that the approval carries safeguards, while leaving the court to decide whether the OCC had legal authority to grant it under this framework.

A bank charter does not insure the Bitcoin in an account

For customers, an institution's federal supervision and the insurance status of their holdings are separate matters. The Protego conditions show how a regulator can impose financial safeguards on a custodian without making the assets it holds for customers eligible for deposit insurance.

The FDIC explicitly excludes crypto assets from deposit insurance, as set out in its fact sheet. Holding Bitcoin with a bank therefore does not confer the protection available to an eligible cash deposit at an FDIC-insured institution.

A separate SEC custody proposal

Investment firms face a different set of requirements when arranging custody for clients. The SEC's October 1 proposal would accommodate qualifying state trust companies and allow adviser self-custody in specified circumstances. That initiative concerns advisers and funds under securities law, whereas ICBA's lawsuit concerns the OCC's authority to charter national trust banks.

What the lawsuit could change

Filing the case does not itself revoke a charter. ICBA is seeking court orders against both the broader chartering framework and Protego's approval, so the consequences will depend on which requests, if any, the court grants.

A ruling against the rule or the interpretive letter could undermine the legal basis for other applications relying on the same approach. A decision confined to Protego's approval would have a narrower reach. For crypto firms planning to operate as national trust banks, that scope will determine whether the case affects a single institution or the licensing route they hope to use. Near-term markers in the case include the OCC's response to the complaint in court filings, whether the agency continues acting on national trust charter applications under the same framework, and whether Protego advances through its preopening requirements while the litigation proceeds.

This article is for informational purposes only and does not constitute legal or investment advice.