America's community banks are taking the nation's top banking regulator to federal court over its practice of handing bank charters to cryptocurrency companies, arguing the agency has exceeded the limits that Congress set.

The Independent Community Bankers of America (ICBA), a trade group representing community banks, filed suit Friday in the U.S. District Court for the District of Columbia against the Office of the Comptroller of the Currency (OCC), challenging the regulator's authority to grant national trust bank charters to crypto firms. Brought under the Administrative Procedure Act — the standard legal vehicle for testing whether federal agencies have acted beyond the authority Congress granted them — the complaint centers on a March 2, 2026 final rule tied to the OCC's Interpretive Letter No. 1176, and asks the court to declare both the rule and the letter unlawful and to set them aside. The ICBA's announcement and the complaint as filed are available on the group's website.

At issue is the national trust charter, a specialized federal charter historically tied to fiduciary functions such as custody and trusteeship, which the trade group says the OCC has stretched into "a side door into the banking system for crypto firms."

ICBA President and CEO Rebeca Romero Rainey argued that allowing companies to obtain such charters while conducting substantial non-fiduciary activities "exceeds the authority Congress granted the agency." Firms that win the charters, the group said, gain the credibility of a federal bank without the that bind insured depository institutions — including Community Reinvestment Act requirements, consolidated supervision, capital and liquidity standards, and FDIC insurance.

The ICBA also flagged a consumer-protection gap. Digital assets held at a crypto firm operating under a trust charter, the group noted, do not carry the federal protections customers expect from a chartered bank. Customers may believe their holdings enjoy bank-level safeguards when they do not, the group argued. The suit further contends that the charter preempts many state consumer-protection laws while subjecting these entities to lighter regulation than traditional banks face. Preemption also speaks to the charter's practical pull: a national trust bank can operate on a single federal footing rather than securing licenses state by state.

The complaint singles out Protego Holdings, whose conditional charter the ICBA wants the court to vacate, citing the firm's governance and risk-control shortcomings.

The lawsuit escalates a fight that has been building as crypto firms flock to the OCC. The agency has cleared or drawn applications from a wave of digital-asset companies, including Circle, Ripple, Paxos, Fidelity, BitGo, Kraken's parent Payward, Jack Dorsey's Block, and the Donald Trump-tied World Liberty Financial.

Sen. Elizabeth Warren has separately called the approvals illegal, a charge the industry has disputed.

The suit lands as the OCC races to finalize GENIUS Act stablecoin rules by November, adding another front to the clash over how deeply crypto should be woven into the federal banking system. The immediate watch items: whether the court takes up the statutory-authority challenge, how the OCC responds in court, and whether the stablecoin rulemaking proceeds on a chartering framework now under legal challenge.