A national trust bank charter is not an end run around regulation

• Key insight: A recent lawsuit by the Independent Community Bankers of America takes aim at national trust banks, arguing that their lack of deposit insurance is somehow problematic. This ignores the reality of their business model.
• Forward look: Community banks are indispensable to the American economy. But their importance does not entitle them to a veto over competition and new technology.
  

There are some in Washington who seem to think that bringing new financial technology inside the federal banking system somehow amounts to escaping regulation. That misguided narrative has now landed in federal court.

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In a lawsuit against the Office of the Comptroller of the Currency, the Independent Community Bankers of America is taking aim at national trust bank charters, arguing that digital asset companies are being allowed into the federal banking system without the regulatory obligations imposed on traditional banks.

ICBA's complaint rests on a basic misunderstanding of what being a federally chartered national trust bank actually means and the OCC's role in regulating banks. ICBA thinks they're merely a rubber stamp on a business model. That's where they're wrong. National trust charters impose the same supervision, examination, and accountability requirements that have formed the backbone of our banking system since the National Banking Act was signed in 1864.

Anchorage Digital Bank became the first federally chartered digital asset bank in the United States in 2021 when much of the crypto world operated outside the banking system. We made the deliberate choice to enter it. That distinction matters. It's odd that more than half a decade after the OCC approved our charter, the ICBA is challenging the OCC's authority to do so.

A national trust bank is a national bank, regulated to the same standards as any other national bank. It is chartered and supervised by the OCC, subject to capital and liquidity requirements and BSA/AML obligations. Those requirements shape how Anchorage Digital Bank operates every day.

Federal law applies the same examination requirements to every national bank, including a baseline annual examination, plus additional examinations as often as the OCC, in its supervisory discretion, considers necessary. Given the cutting-edge nature of our business model, I suspect Anchorage Digital Bank has been examined far more often than the typical community bank. That level of oversight is what holding a federal charter is supposed to look like.

What a national trust bank is not is a deposit-taking community bank. Anchorage Digital Bank does not engage in fractional reserve banking like community banks do. Our bank provides fiduciary custody of digital assets — fully reserved and fully segregated. It is a different business model altogether, not a lighter version of deposit banking or a regulatory loophole.

Despite those core differences, ICBA points to the absence of FDIC insurance as a flaw in national trust charters. That insurance protects some deposits in a fractional reserve model. But a trust bank doesn't take deposits and is not part of that system, which is why deposit insurance is the inappropriate measurement in the first place. There is no absence of oversight, just a different risk profile. A trust bank like Anchorage Digital functions as a fiduciary custodian. What's checked in is available: 24/7, 365 days a year to the client, within certain necessary controls. A deposit-taking bank holds only a fraction of deposits at any given time, with federal insurance to backstop the rest, up to the legal limit.

The better question is whether each institution's actual risks are being identified, supervised and addressed, which is the exact purpose of federal bank supervision.

The National Bank Act has endured for more than 160 years because the American banking system has never required every bank to look the same. Congress has long recognized national banks limited to trust and custody activities. Digital assets don't erase that distinction. 

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Further, keeping innovation outside the federal regulated banking system isn't prudent consumer protection. The right way to protect consumers is to bring the innovation inside, examine it and hold it to federal banking standards.
Digital assets are already part of the American financial system. Blockchain and tokenization are new technologies, but banks using them still fit within the OCC's regulatory purview, and has been the case under President Trump and President Biden. Eventually, all banks will be digital asset-focused banks. Stablecoins, tokenized deposits and agentic financial services are all part of the future of U.S. banking. We need to ask ourselves whether institutions conducting them should be encouraged to operate inside a clear federal regulatory perimeter, where regulators can examine them, impose standards and demand remediation if a bank does not comply.

The answer is clear: Bringing responsible financial activity inside the federal perimeter makes the financial system stronger.

A robust yet innovative regulatory perimeter is a national asset. It attracts builders, innovators, and entrepreneurs seeking a place to responsibly create value and growth. A wider perimeter leads to a stronger America. Its value comes from the standards enforced inside it, not from limiting membership to businesses built on technology from the last era.

Let's also be clear: Community banks, who provide credit to families, farms, and small businesses across the country, are indispensable to the American economy. But their importance does not entitle them to a veto over competition and new technology.

Traditional banks can and increasingly do participate in digital assets. They should. Technological changes and competition are signs of a healthy market. Regulators shouldn't use their authority to protect one business model from another. Their job is to supervise institutions according to the risks they actually create, not to choose winners and losers. Weaponizing that system stifles American innovation and growth.

Competition doesn't mean the regulatory system isn't working.

The OCC's responsibility is to determine whether institutions seeking a national charter can operate safely and in accordance with federal law. Applicants should have to prove that they can meet that standard. Not everyone will. It's a good thing that a federal bank charter is hard to earn. But that doesn't mean it should be impossible simply because your business model doesn't include demand deposits.

The nearly six years we've operated inside the federal banking system have shown us that a national trust charter is not a way around regulation. It's a decision to operate within it.