- Coinbase accuses major banking groups of blocking its national trust bank charter to limit crypto competition.
- Banks warn that unregulated stablecoins could drain over 25% of U.S. bank deposits, harming lending capacity.
- Policy disputes intensify as banking lobbies push regulators to restrict crypto rewards and stablecoin programs.
Coinbase is pushing for a significant integration with the US banking system, while regular banking institutions are trying to prevent that from happening. This comes as a reaction to Coinbase’s situation this week, where its Chief Legal Officer, Paul Grewal, was highly critical of large banking organizations that are opposing its application for a national trust bank charter.
This came after a new campaign was launched by the Independent Community Bankers of America (ICBA) in an attempt to advise federal regulators against accepting Coinbase’s bid for a charter for its subsidiary, Coinbase National Trust Company.
“Imagine opposing a regulated trust charter because you prefer crypto to remain… unregulated,” Grewal wrote in a post on his X account. “The banking lobby is trying to establish ‘regulatory moats’ that will keep out competitors in digital assets.”
Coinbase Charter Faces Strong Bank Opposition
On November 3, a letter was filed by ICBA with the Office of the Comptroller of the Currency (OCC) stating that Coinbase’s application fails to meet a standard required for a federal charter. This was because Coinbase may experience financial difficulties in periods when crypto markets decline.
They also argued against the legality of chartering approval in terms of OCC Interpretive Letter 1176, a guideline that enables national trust banks to engage in non-trust activities. In ICBA’s view, this was not developed through a legitimate public process; thus, its validity is questionable and cannot be used to support Coinbase’s application.
Simultaneously, a new banking program is also being introduced that is aimed at stablecoins.
The American Bankers Association and 52 state banking groups also submitted a letter to the US Treasury Department on November 4. In that letter, they asked for stronger enforcement of a law known as the “GENIUS Act.” This law prohibits issuers of stablecoins from offering interest to customers in their accounts.
Banks say that crypto platforms are circumventing the rule by offering rewards through an affiliate marketing program rather than directly from issuers.
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Coinbase Accuses Banks of Blocking Competition
Banking associations argue that if non-yield stablecoins continue to proliferate without control, US banks may have their deposits dwindle by as much as 25.9%, eroding a total of $1.5 trillion that is currently fueling loans to households and businesses. This will make it harder for small businesses, farmers, and rural areas to get loans.
Coinbase’s Chief Policy Officer, Faryar Shirzad, responded that Congress clearly defined a third party’s ability to offer a reward, and now banking institutions are trying to go back and alter something Congress passed.
“Congress has already answered that question,” Shirzad said, implying that the bank lobby is in effect disregarding the legality because digital assets challenge their competitiveness.
Now, the battle for Coinbase’s charter is part of a larger fight between traditional banks that seek to maintain control of the finance system and those in the crypto world, who claim that consumers are not provided adequate choices.
Now, federal regulators have a decision to make regarding whether innovation or protectionism will define the next era of banking in the US.
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