Coinbase, the prominent cryptocurrency exchange, is facing significant pushback from a banking advocacy group regarding its application for a national trust charter. The Independent Community Bankers of America (ICBA) has formally opposed Coinbase’s request, highlighting concerns about the potential implications for traditional banking.
In a letter addressed to the US Office of the Comptroller of the Currency (OCC), which is responsible for approving banking applications, the ICBA expressed its strong disapproval of Coinbase’s subsidiary seeking a trust charter. The letter criticized the “untested” aspects of cryptocurrency custody and raised doubts about Coinbase’s ability to maintain profitability during downturns in the crypto market.
Paul Grewal, Coinbase’s chief legal officer, responded to the ICBA’s opposition, asserting that the banking group is acting to “protect their own” interests. He stated in a post on social media platform X, “That’s ICBA’s position. It’s another case of bank lobbyists trying to dig regulatory moats to protect their own.” Coinbase filed its application for the national trust charter in October 2023 as part of its strategy to connect the cryptocurrency sector with traditional finance.
The ICBA’s letter urged the OCC to reject Coinbase’s application or, at the very least, extend the public review period to better assess the legal and regulatory implications of the proposal. Reports indicate that the OCC could take between 12 and 18 months to evaluate Coinbase’s application.
Coinbase has clarified that it does not intend to operate as a traditional bank through this application. Nonetheless, other cryptocurrency companies, such as Ripple Labs and Circle, have sought similar charters in response to new legislation aimed at establishing a regulatory framework for payment stablecoins. Ripple and Circle have both introduced their own stablecoins, with Ripple’s offering known as Ripple USD.
As of October 2023, the OCC had not announced a decision regarding Ripple’s application, which was under review. The agency’s response to inquiries about the status of the applications from both Ripple and Coinbase was pending at the time of publication.
This ongoing debate highlights the tensions between cryptocurrency firms and traditional banking institutions as they navigate regulatory landscapes. The ICBA’s actions reflect broader concerns within the banking sector regarding the rapid growth of digital assets and their potential disruption to established financial systems.
