The Halo of the Charter

This article presents a comprehensive legal analysis of the Office of the Comptroller of the Currency's December 2025 conditional approvals of five national trust bank charters for cryptocurrency and digital-asset firms. It argues that these approvals (1) exceed the OCC's statutory authority under the National Bank Act, (2) constitute arbitrary and capricious agency action under the Administrative Procedure Act, (3) transgress the major-questions doctrine articulated by the Supreme Court, (4) violate federalism principles embedded in the Dodd-Frank Act's preemption framework, and (5) threaten the structural integrity of the dual-banking system that has served American communities since 1863.

The analysis proceeds in eight parts. Part I establishes the constitutional and historical foundations of the national bank charter. Part II examines the statutory text governing trust-charter authority. Part III details what the OCC actually approved. Part IV presents the legal claims available to challengers. Part V analyzes the political economy of charter arbitrage. Part VI documents the threat to community banks and Main Street credit availability. Part VII proposes remedies. Part VIII offers governance guidance for community bank boards navigating this landscape.

The conclusion is straightforward: the OCC has exceeded its lawful authority, and its charter approvals should not survive judicial review.

A. The National Bank as Instrument of Sovereignty

The power to charter national banks is not a routine administrative function. It is an exercise of constitutional magnitude—a delegation of sovereign monetary authority to private institutions operating under federal supervision.

The constitutional foundation for national banking rests on the Necessary and Proper Clause. In McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819), Chief Justice Marshall upheld the constitutionality of the Second Bank of the United States, reasoning that Congress possesses implied powers to create instrumentalities necessary to execute its enumerated powers over currency, taxation, and commerce:

"Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional."

— McCulloch v. Maryland, 17 U.S. at 421

This reasoning carries a corollary that modern administrative law sometimes forgets: if national banks derive their legitimacy from their service to constitutional ends, then their charters must be confined to purposes consistent with those ends. A national bank charter issued for purposes unrelated to—or inconsistent with—the constitutional functions of banking exceeds the scope of the delegation.

B. The National Currency Act of 1863: Crisis and Creation

The Office of the Comptroller of the Currency was born not in a season of innovation, but in the crucible of existential crisis.

By 1862, the Union faced catastrophe. The war effort required unprecedented capital. The existing banking system—a patchwork of state-chartered banks issuing over 7,000 distinct note varieties of varying reliability—could not provide it. Counterfeiting was rampant. Public confidence was fractured. The government's ability to finance military operations hung in the balance.

Secretary of the Treasury Salmon P. Chase proposed a solution: a national banking system that would accomplish three objectives simultaneously:

1. Create a uniform national currency backed by U.S. government bonds, replacing the chaotic state-bank-note system.
2. Establish a market for government securities by requiring national banks to hold federal bonds as backing for their note issuance.
3. Impose federal supervision over institutions granted the privilege of participating in the nation's monetary infrastructure.

The National Currency Act of 1863—subsequently amended and recodified as the National Bank Act of 1864—was thus a nation-building statute. It did not merely regulate existing institutions; it created a new class of federally chartered entities designed to serve public purposes that private institutions, left to their own devices, would not reliably serve.

The Supreme Court recognized this public character repeatedly in the decades following the Act's passage:

"National banks are quasi-public institutions, and, for the purpose of executing the powers conferred upon them, are governmental agencies."

— Davis v. Elmira Savings Bank, 161 U.S. 275, 283 (1896)

This history matters because it illuminates what the national bank charter is: not a license to conduct financial business under federal imprimatur, but a public franchise—a grant of authority to participate in sovereign functions, carrying obligations commensurate with its privileges.

C. The Dual-Banking System: Federalism by Design

The National Bank Act did not abolish state banking. It created a parallel federal system, leaving the state system intact. This was deliberate.

The resulting "dual-banking system"—in which state and federal charters coexist—reflects core federalism values:

1. Regulatory competition. States and the federal government compete to offer regulatory frameworks that balance safety, soundness, and economic dynamism. This competition disciplines both sovereigns against excessive regulation or excessive permissiveness.
2. Democratic accountability. State banking regulators are accountable to state electorates. Federal regulators are accountable through different mechanisms. The dual system preserves multiple channels of democratic oversight.
3. Experimental diversity. States can innovate in regulatory approaches. Successful innovations can be adopted by other states or the federal government. Failed experiments remain contained.
4. Anti-monopoly function. A single federal regulator controlling all bank charters would concentrate power dangerously. The dual system prevents such concentration.

The dual-banking system is not a historical accident to be overcome through administrative efficiency. It is a structural constitutional choice that agencies must respect.

When the OCC issues charters that effectively preempt state authority over financial activities—without clear congressional authorization—it does not merely regulate. It reallocates sovereign power between federal and state governments. That is a constitutional function reserved to Congress.

A. The Original National Bank Act: Powers and Limitations

The National Bank Act of 1864 authorized national banks to engage in the "business of banking"—a term the Act did not define but that was understood, in the context of 1864, to encompass: receiving deposits, making loans, discounting commercial paper, issuing circulating notes (until 1935), conducting foreign exchange transactions, and providing letters of credit.

These activities shared a common characteristic: they involved financial intermediation—the transformation of deposits into loans, the channeling of capital from savers to borrowers, the provision of payment services, and the creation of credit.

The Act's structure reflected a bargain: national banks received valuable privileges (federal charter, access to the payments system, authority to issue currency, preemption of certain state laws) in exchange for accepting supervision, examination, and capital requirements designed to ensure safety, soundness, and service to public purposes.

B. The 1978 Special-Purpose Trust Charter

In 1978, Congress clarified that the Comptroller could charter national banks "limited to the operations of a trust company and activities related thereto."

This amendment created the "special-purpose trust charter"—a charter for institutions that wished to focus exclusively on fiduciary activities without engaging in deposit-taking or lending.

The statutory language is precise and limiting:

• "Limited to": The charter is restricted; it does not authorize the full range of banking activities.
• "The operations of a trust company": The authorized activities are those historically associated with trust companies—fiduciary administration of property for the benefit of others.
• "Activities related thereto": Ancillary activities incident to trust operations are permitted, but only insofar as they support the core fiduciary function.

This is not ambiguous statutory language requiring agency interpretation. It is a term of art with established meaning in banking law and practice.

C. What "Trust Company Operations" Means

A "trust company" is an institution that holds and administers property for the benefit of others in a fiduciary capacity. The paradigmatic trust company activities include:

• Estate administration: Serving as executor or administrator of decedents' estates
• Trust administration: Managing assets held in trust for beneficiaries
• Guardianship and conservatorship: Managing property for minors or incapacitated persons
• Pension and benefit plan administration: Serving as trustee for employee benefit plans
• Corporate trust services: Acting as trustee for bond issuances, indentures, and similar instruments
• Custody: Holding securities and other assets for safekeeping (as incident to fiduciary activities)

The common thread is fiduciary obligation—the legal duty to act in the best interest of beneficiaries rather than for the trustee's own profit.

What trust company operations do not include: operating payment systems, managing stablecoin reserves, providing trade execution services, facilitating cryptocurrency transactions, or building settlement infrastructure for digital-asset markets.

These are commercial activities—services provided for profit, without the fiduciary structure that defines trust company operations.

A. The December 2025 Conditional Approvals

On December 12, 2025, the OCC issued conditional approvals for five national trust bank charter applications:

De Novo Charters:

1. First National Digital Currency Bank, N.A. (Circle Internet Group, Inc.)
2. Ripple National Trust Bank (Ripple Labs Inc.)

Conversions from State Trust Charters:

3. BitGo Bank & Trust, N.A.
4. Fidelity Digital Assets, N.A.
5. Paxos Trust Company, N.A.

B. The Disconnect Between Charter Authority and Proposed Activities

The OCC's decision letters reveal a fundamental mismatch between the statutory authority invoked and the activities proposed.

Circle's First National Digital Currency Bank is not designed to administer estates or manage trusts for beneficiaries. It is designed to manage the reserve backing a stablecoin—USDC—that functions as a payment instrument used by millions of users globally. The decision letter explicitly contemplates that the bank will support Circle's stablecoin ecosystem.

Reserve management for a payment instrument is not trust administration. It is treasury operations for a commercial enterprise. The fact that assets are "held" does not transform commercial treasury functions into fiduciary trust services.

Fidelity Digital Assets proposes to offer services on a "non-fiduciary basis"—the very opposite of trust company operations. The decision letter contemplates stablecoin issuance and staking, activities that have no historical connection to trust administration.

C. The CRA Exemption: The Smoking Gun

Perhaps the most revealing element of the Circle decision letter is the OCC's acknowledgment that the Community Reinvestment Act does not apply to the proposed bank because CRA obligations attach only to "insured depository institutions," and the proposed bank "will not be an insured depository institution."

This is not a technicality. It is the structural tell.

The Community Reinvestment Act of 1977 was enacted precisely because Congress recognized that the benefits of a bank charter—access to the payments system, the right to hold deposits, the reputational halo of federal supervision—come with corresponding obligations to the communities from which deposits are drawn. Banks that take from communities must give back.

When the OCC charters entities that receive the "bank" halo, achieve national scale, and potentially divert funds from traditional deposit bases—while bearing no CRA obligation—it creates a two-tier system in which some federally chartered institutions carry the public-duty side of the bargain and others do not.

This is not "leveling the playing field." This is tilting it.

The following comparison illustrates the structural asymmetry between traditional community bank charters and the "charter-lite" national trust bank model the OCC has now blessed:

This is the heart of the grievance: These charters do not "add banks." They add competitors to banks—wrapped in the credibility of the banking system—without the obligations that justify that credibility.

A. The Strategic Logic

Crypto platforms and stablecoin issuers face a strategic problem. They want the benefits of banking—public trust, regulatory clarity, national scope, institutional access, preemption leverage—without the costs: CRA compliance, FDIC insurance assessments, consolidated supervision, and the full prudential regulatory framework.

The "national trust bank" charter solves this problem. It provides federal status and preemption benefits while avoiding community obligations and insurance costs. This is not innovation. This is arbitrage—the exploitation of regulatory gaps to obtain benefits without corresponding burdens.

B. The Vendor Capture Playbook

Once platforms secure charter-lite federal status, they position themselves as infrastructure providers to the banks they are structured to displace. The playbook operates in stages:

1. Manufacture urgency: Warn banks they face existential deposit flight without immediate adoption of stablecoin and blockchain capabilities.
2. Position as indispensable: Offer turnkey "digital asset core" solutions as the only practical path.
3. Capture the economics: Control data flows, pricing, routing, and settlement once integrated.
4. Reduce banks to endpoints: Banks become branded compliance wrappers for platform-controlled rails.

If the infrastructure is funded by entities whose stated objective is to replace banks, then integrating that infrastructure is not partnership. It is strategic subordination.

C. The Quiet Part Out Loud

Coinbase CEO Brian Armstrong has stated publicly that he wants Coinbase to be a "bank replacement" and users' "primary financial account." This is not marketing hyperbole. It is strategic doctrine.

Community banks that integrate platform-aligned infrastructure without structural protections are not modernizing. They are financing the competitive architecture that will be used against them.

A. What Community Banks Do

Community banks are not legacy institutions awaiting disruption. They are essential infrastructure for economic mobility. They finance first businesses, support agricultural credit, underwrite local housing, and provide relationship banking with judgment that algorithms cannot replicate.

B. The Deposit-Diversion Threat

When customers move funds from FDIC-insured deposit accounts to platform-controlled stablecoin holdings, community bank balance sheets contract, local credit availability declines, capital flows to non-local uses, and the community loses twice—first through deposit outflows, then through reduced credit availability.

The American Bankers Association has estimated that deposit losses from stablecoin migration could reach 25.9%, eliminating approximately $1.5 trillion in lending capacity. Small business credit would contract by $110 billion; farm credit by $62 billion.

C. The CRA-Free Competitor Problem

When the OCC charters entities that operate nationally, market themselves as "banks," and compete for funds—while bearing no CRA obligation—it creates structural competitive asymmetry. Community banks carry CRA expectations as part of their charter's social contract. Trust-chartered crypto platforms carry no such obligation.

This is not a level playing field. It is a structurally tilted one—tilted toward extraction and away from community investment.

A. Vacatur of the Conditional Approvals

The appropriate remedy for unlawful agency action is vacatur—judicial invalidation with remand for proceedings consistent with the court's opinion. See FCC v. Prometheus Radio Project, 592 U.S. ___ (2021).

B. Injunctive Relief

Courts should consider injunctive relief prohibiting the OCC from issuing further national trust bank charters to crypto/digital-asset firms until Congress has addressed the scope of trust-charter authority.

C. Statutory Amendment

Congress should amend the National Bank Act to: define "trust company operations" explicitly; require CRA-equivalent obligations for any federally chartered entity competing for consumer funds; preserve state authority by clarifying that federal trust charters do not preempt state consumer-protection statutes; and establish consolidated supervision for any federally chartered entity whose parent or affiliates engage in financial activities.

While legal challenges proceed, community bank boards must protect their institutions through rigorous governance discipline.

The national bank charter is not a credential to be acquired or a brand asset to be leveraged. It is a delegation of sovereign authority to private institutions willing to accept public obligations.

That delegation carries privileges: federal status, national scope, preemption protections, access to the payments system, the reputational halo of federal supervision. But those privileges exist only because they are coupled with duties: safety and soundness, consumer protection, community reinvestment, supervisory accountability.

When the OCC issues charters to entities structured to capture the privileges while avoiding the duties—entities that can scale nationally, preempt state law, and compete with community banks for funds, while bearing no CRA obligation, no deposit-insurance burden, and no consolidated supervision—it does not modernize the banking system. It corrupts the charter's meaning.

The dual-banking system is not a legacy structure awaiting administrative rationalization. It is a constitutional choice—a deliberate allocation of power between federal and state sovereigns designed to preserve competition, accountability, and democratic governance.

The Community Reinvestment Act is not a bureaucratic burden to be avoided through creative chartering. It is the codification of the social contract that justifies the bank charter's privileges.

If crypto platforms and stablecoin issuers want to participate in the American banking system, they should be welcome—on the same terms as every other participant.

Same activities. Same supervision. Same obligations.

That is not protectionism. That is not resistance to change. That is equality under law.

The OCC's charter-lite approvals fail that standard. They should be vacated. The Comptroller should be enjoined from further approvals until Congress speaks clearly. And the courts should vindicate the principle that has governed American banking since 1863:

A national bank charter is a public trust.
It is time to hold the OCC to that standard.