Senator Elizabeth Warren has raised concerns with the Office of the Comptroller of Currency about the recent national trust charters, which provide crypto firms with easy access to the Federal Reserve system.
Warren is pressing the OCC over the decision to approve national trust charters for crypto companies, per Bloomberg report Tuesday.
The OCC issues national trust bank charters, which are specialized federal business licenses that allow organisations to function nationwide as fiduciaries and offer services including settlement, safekeeping, and custody.
The OCC has approved at least nine national trust charters for cryptocurrency companies that “appear to go far beyond the narrow set of activities permitted by law” in an “apparent violation of the National Bank Act,” according to Warren’s letter to OCC chief Jonathan Gould, stating that some companies appear “seemingly ineligible” for that status.
The questioning comes right after Kraken’s parent Payward gained the national charter license, giving the firm full access to Fed’s treasuries.
Why is the charter license an issue?
A national trust charter is not the same as a full banking licence, but it can still give companies access to key Federal Reserve payment systems. At the same time, trust banks are not regulated as strictly as traditional banks because they do not provide FDIC-insured deposits.
That difference is what concerns Elizabeth Warren. According to the report, trust companies are usually meant to handle narrower services like custody and asset management.
Warren argued that some crypto firms may be using these structures to carry out activities that look much closer to traditional banking, while avoiding some of the tougher regulations that regular banks must follow.
Elizabeth Warren and other opponents further claim that through issuing such charters, the OCC is essentially permitting crypto enterprises to function like banks but under less regulatory scrutiny than banks are subject to.
One of the key concerns here is that national trust companies do not have FDIC insurance. In other words, customer money would not be covered by the government in case of bankruptcy of such institutions.
Critics warn that this could create a form of “shadow banking,” where companies carry out bank-like activities such as payments, custody and even lending, while avoiding many of the rules that are designed to protect consumers and preserve financial stability.
Supporters of tighter regulation argue that if crypto firms are increasingly performing functions similar to banks, they should also be held to similar regulatory standards, transparency requirements and consumer protection safeguards.
Dispute also stems from stablecoin firm growth
The dispute comes at a time when stablecoin issuers and other crypto companies are increasingly trying to move closer to the traditional banking system. The U.S. administration’s crypto-friendly stance has helped stablecoin firms grow a larger user base across the region. Friendly laws like the GENIUS Act and The CLARITY Act have only added to the level of trust stablecoin issuers have won in the sector.
According to Bloomberg, several stablecoin firms have started pursuing national trust charters, which would allow them to hold short-term U.S. government debt and other highly liquid assets commonly used to back dollar-pegged stablecoins.
Affiliates connected to Paxos and Coinbase have already secured approvals, while an application linked to World Liberty Financial, the Trump-backed crypto venture, is still under review.
Warren has asked Comptroller Jonathan Gould to disclose confidential portions of the approved applications and clarify whether the OCC’s updated rules now allow trust companies to engage in broader “non-fiduciary” activities without being subjected to the same level of regulatory scrutiny and obligations faced by traditional national banks.
