OCC’s Stablecoin Trust Bank Charters Violate “Major Questions Doctrine,” ICBA Suit Argues
Payments, crypto, and stablecoin companies remain full speed ahead when it comes to pursuing national trust bank charters, despite a banking trade association’s new legal challenge questioning the Office of the Comptroller of the Currency’s authority to grant such charters filed last week.
Crypto card issuer Rain announced it filed an application with the OCC to form Rain National Trust Bank. The proposed bank would be headquartered in New York and names former Square Financial Services CFO Brandon Soto as the entity’s proposed President and CEO. Square Financial Services is Block’s industrial loan company-chartered bank subsidiary.
According to its announcement, if approved, Rain National Trust Bank “will provide fiduciary custody of digital assets and US dollars, reserve management for permitted stablecoin issuers, and issuance and redemption of US dollar-backed stablecoins for institutional clients.”
Describing its custody of digital assets and US dollars as “fiduciary” is likely no accident, as there is a brewing legal battle over whether or not the OCC has the authority to grant trust bank charters to crypto- and stablecoin-related firms that are not primarily focused on engaging in “fiduciary activities.”
Rain’s announcement clarifies that, “If approved, as an uninsured national trust bank, RNTB will not accept deposits and will not make commercial loans. Assets held by RNTB for clients will be custody assets held for identified owners, not liabilities of the bank, and the reserves backing any stablecoin RNTB issues will not be pledged, lent, or reused.”
The charter application describes Rain as “a financial technology company founded in 2021 and operates payments infrastructure that brings together accounts, cards, and global money movement on stablecoin rails through a single unified application programming interface. Enterprises use [Rain]’s platform to access compliant payment programs and modern settlement infrastructure.”
While Rain is best known as an infrastructure provider for issuing crypto- and stablecoin-backed spending cards, it also offers wallet infrastructure (and recently announced it has acquired closed-loop fiat wallet/payment startup Ansa), crypto/stablecoin on- and off-ramping, payments, and named virtual accounts.
In addition to its Puerto Rico-issued money transmitter license, Rain has at least one bank partner, SSB, and leverages other licensed card issuers in various jurisdictions, the company’s website says.
Rain, backed by venture capital investors that include ICONIQ, Lightspeed, and Bessemer Venture partners, was valued at just shy of $2 billion in a $250 million funding round announced this January — but the company hasn’t been without some controversy.
The company partnered with Venezuelan stablecoin app Kontigo, issuing Visa cards for the company’s primarily Venezuela-based users, despite Kontigo’s extensive ties to the Venezuelan government and its rumored links to the indicted son of former Venezuelan President Nicolas Maduro. Kontigo facilitated the injection of stablecoin-based dollar liquidity into the Venezuelan economy from the illicit sale of sanctioned oil, Fintech Business Weekly reported in January 2026 and the Wall Street Journal later confirmed.
Kontigo’s cards issued by Rain appeared to have been shut down just hours after an inquiry from Fintech Business Weekly related to a January 2026 story on the Venezuelan app.
Rain has also been linked to a number of sites offering so-called “no KYC” cards, including Uncash.
At the time, a Rain spokesperson clarified that “Uncash was never an authorized Rain program” and that the card information that appeared on Uncash in October was associated with a “a user that successfully completed KYC (with ID verification and liveness checks), received a card, and then resold it via the Uncash site violating [Rain’s] terms of service.” Uncash abruptly shutdown after Fintech Business Weekly’s reporting, blaming Mastercard.
More recently, Rain also experienced a hack of “smart contracts” used as part of its Solana crypto card infrastructure. The hacker exploited a vulnerability in the outdated software Rain was running to support several card programs, allowing the bad actor to drain over $1 million in uninsured customer funds. Impacted users were reimbursed, but the incident drew scrutiny to risks in programs that are often marketed as “self custodial” and raised questions about who would foot the bill — if anyone — had the losses been larger than they were.
It is unclear to what extent, if any, these sanctions, BSA/AML, and operational and information security issues could impact Rain’s OCC charter application.
Cross-border payments firm Wise saw AML-related issues cited in the OCC’s letter denying its application to charter a U.S. national trust bank — though, it’s worth emphasizing, Wise had reached an official settlement with multiple state regulators related to deficiencies in its AML/CFT program. That settlement occurred while the OCC was evaluating Wise’s application.
Modern Treasury Also Seeking Trust Bank Charter
Meanwhile, ledgering and payment infrastructure startup Modern Treasury also announced last week that it has filed an application with the OCC to charter a national trust bank.
The company’s charter application describes Modern Treasury as “one of the most trusted infrastructure companies for global money movement, operating payment orchestration and ledgering software for over 300 commercial customers. Modern Treasury offers a stablecoin payments platform where it operates as a fully managed payment service provider that maintains sponsor banking relationships through its subsidiary, M-Cubed Labs, Inc. Modern Treasury’s platforms provide a unified API for initiating and tracking payments across ACH, wire, RTP, FedNow, checks, push-to-card rails and stablecoins, together with a proprietary ledger that reconciles money movement across those rails and across fiat and stablecoin flows.”
Per the company’s announcement, “The proposed bank would provide Modern Treasury customers with a unified custody solution that seamlessly integrates the company’s payments and settlement capabilities with digital asset and custody services. Together, Modern Treasury and the bank would give customers an integrated way to custody and move stablecoins and fiat. The proposed bank would not make loans or issue stablecoins.”
Holding a trust bank charter would allow Modern Treasury to consolidate custody of customer assets in a federally-supervised institution and support the transfer, settlement, and conversion of custodied balances, the company’s application says.
Specifically, if approved, Modern Treasury’s trust bank would engage in digital asset custody in a fiduciary capacity; engage in fiat custody in a non-fiduciary capacity, including cross-border settlement and currency conversion, non-U.S. dollar custody, and various funds transfer methods; and engage in related conversion services, enabling customers to convert between fiat and stablecoins.
ICBA Files Suit, Arguing OCC Has Exceeded Its Authority In Granting Crypto Trust Bank Charters
The concept of a “trust bank” charter and what activities such entities are and are not allowed to engage in can seem a bit esoteric, especially to those unfamiliar with the complexity and nuance of the U.S. banking system.
The current flood of trust charter applications has roots that date to current Comptroller Jonathan Gould’s 2018-2021 stint at the OCC, when he held the role of Senior Deputy Comptroller and Chief Counsel.
Though, one could argue, the origins go all the way back to 1913, when the Federal Reserve Act was passed, which let the Fed grant national banks permits to act as trustee, executor, administrator and registrar, where state law didn’t forbid it. The 1913 change was intended to allow nationally chartered banks to compete on a more even playing field with state chartered banks and trust companies, which were increasingly beginning to offer fiduciary services, such as acting as trustees, executors, and guardians of estates, along with banking services.
A 1962 law shifted this authority from the Fed to the OCC, defined in the 12 U.S.C. § 92a.
The OCC’s authority to grant trust-only charters was challenged in 1976 while it was evaluating a trust bank charter application for City Trust Services, N.A. Twelve banks objected to the charter, but the OCC granted it anyway. The National State Bank of Elizabeth sued, and a court found in its favor, holding the charter was unlawful and ordering it to be revoked.
Congress resolved the issue in 1978 with a one-sentence addition to 12 U.S.C. § 27, enacted as part of the 1978’s Financial Institutions Regulatory and Interest Rate Control Act. Section 1504 clarified that a national bank is “not illegally constituted solely because” the Comptroller has required its operations to be “limited to those of a trust company and activities related thereto.”
When the Third Circuit Court of Appeals ruled on the National State Bank of Elizabeth case in 1979, it reversed the lower court’s decision, holding that Congress’ 1978 clarification retroactively validated the Comptroller’s action to grant the charter, but only if “trust company” meant fiduciary operations. Judge Maris’s opinion overturning the lower court’s decision explained (emphasis added):
[W]e do have the background fact that Congress by the Act of September 28, 1962, 12 U.S.C.A. § 92a, had empowered the Comptroller by special permit to authorize a national banking association to exercise certain fiduciary powers in addition to its normal banking functions.
We think that it must have been these specially permitted fiduciary powers to which Congress intended to refer when by its recent enactment it authorized the Comptroller to restrict the operations of a national bank to those of a trust company and activities related thereto.
In other words, it was the fiduciary operations carried on in the trust department of such a company or of a commercial bank to which reference must have been intended. Only by being so read does the statute have full meaningful effect and we so read it.
More recently, OCC interpretive letter 1176, which Gould authored in 2021 in his role as OCC Chief Counsel during the first Trump administration, laid the groundwork for a more expansive view of the types of activities permitted under a national trust bank charter.
In that interpretive letter — which never went through a notice and comment period — Gould argues that “a national bank chartered under 12 U.S.C. § 27(a) is not limited to fiduciary activities as defined for purposes of 12 C.F.R. Part 9 and may engage in any permissible activities of a trust company.”
Gould leans on the clarifying sentence added by Congress in 1978 in making his argument:
Thus, Gould’s interpretive letter argues, “In the absence of other textual and statutory guidance, the phrase ‘trust company’ contained in 12 U.S.C. § 27(a) has been construed to refer to and include the activities of trust departments of banks as well as the activities of trust companies and trust banks authorized under the laws of the various states.”
And earlier this year, the OCC, under Gould’s leadership as Comptroller, finalized a rule on national bank chartering. The final rule replaces the term “fiduciary activities” with “the operations of a trust company and activities related thereto” in 12 CFR 5.20.
Per the rulemaking, “The OCC believes that these amendments will eliminate potential confusion as to the intent, and the OCC’s interpretation, of the existing regulation,” but, the rule says, through the revisions “the OCC intends to neither expand nor contract the OCC’s authority to charter a national bank.”
What Does the ICBA Argue?
The Independent Community Bankers of America, a trade group primarily representing banks with less than $10 billion in assets, sees things differently than Comptroller Gould and the OCC.
The ICBA filed suit against the OCC and Gould, in his official capacity, last week in federal court in Washington, DC, arguing that approving trust bank charters for novel entities dealing primarily with cryptocurrencies and stablecoins exceeds the OCC’s authority, poses and safety and soundness risk to the U.S. banking system, and risks causing consumer confusion and harm.
ICBA President and CEO Rebeca Romero Rainey commented on the lawsuit, saying in part, “The OCC’s decision to allow companies to obtain national trust bank charters to conduct substantial non-fiduciary activities exceeds the authority Congress granted the agency. Congress did not create the national trust charter as a side door into the banking system for crypto firms seeking the credibility of a federal bank charter without the Community Reinvestment Act obligations, consolidated supervision, capital and liquidity standards, and FDIC insurance that apply to insured depository institutions.”
The ICBA’s lawsuit argues that, through the aforementioned final rule and the earlier interpretive letter 1176, the OCC “asserts sweeping new powers to charter national trust banks that are not authorized by the National Bank Act.” The ICBA warns that this creates a “gaping hole in financial regulation,” as “[U]nlike traditional community banks, national trust banks fall outside much of federal financial regulation” while enjoying federal preemption of many state laws, including those defining consumer protections.
IL 1176 and the final rule “thus perversely allow entities engaged in highly risky cryptocurrency and digital assets activities to enter the banking system under lightly regulated national charters rather than the more rigorously regulated traditional bank charter” and, simultaneously, place community banks at a competitive disadvantage.
The ICBA’s lawsuit argues that “[t]he OCC misreads an amendment that Congress made to the NBA in 1978” — the single sentence clarification following the National State Bank of Elizabeth challenge. “The OCC’s sweeping claim of newfound powers in the nearly 50 year-old amendment to the NBA is contrary to both the statutory text and the major questions doctrine,” the suit says.
This sentence “provides the OCC authority to limit national bank charters to providing fiduciary services without taking deposits,” but “does not provide the OCC sweeping authority to issue national bank charters to non-fiduciary crypto companies,” the ICBA argues.
The OCC lacks the authority, the ICBA says, to charter limited-purpose national trust banks that are neither depository nor fiduciary, as is arguably the case for many of the crypto- and stablecoin-focused applications.
The ICBA’s suit points to the Third Circuit Court of Appeals decision in the National State Bank of Elizabeth case to support its argument that OCC-chartered trust banks are limited in scope, arguing:
The Third Circuit in National State Bank of Elizabeth thus held that the phrase “operations . . . limited to those of a trust company and activities related thereto” added in the amendment to section 27(a) refers to the “specially permitted fiduciary powers” under section 92a. 591 F.2d at 231. Otherwise, the Third Circuit explained, the amendment’s reference to “limited” operations would be “virtually meaningless since, in most states . . . trust companies are authorized to and ordinarily do conduct the general banking business.” Id.
An unpublished OCC interpretive letter in 1980 and another interpretive letter in 1983 reaffirmed this view, the ICBA says, with the 1983 letter explaining that section 92a “did not mean that national banks were to be given all powers conferred on state trust institutions by the laws of the various states creating them. Rather, the Federal Reserve Board was authorized to permit national banks to exercise those fiduciary powers.”
The ICBA’s suit argues that allowing crypto- and stablecoin-focused business models to operate via national trust bank charters could pose risks to the banking system writ large, giving as an example the failure of crypto exchange FTX, which, the suit says, led to a run and the eventual failure or liquidation of Silvergate and Signature Bank.
Crypto-focused business models also pose elevated risks of fraud, money laundering, and cybercrime, the ICBA argues. The suit also argues that “[c]rypto companies also present significant national security risks because they are often targets for foreign agents to commit cyberattacks. For example, the United Nations Panel of Experts detailed investigations into 58 cyberattacks committed by North Korean agents against crypto companies between 2017 and 2023, costing more than $3 billion.”
Should a national trust bank fail, the FDIC would have no role to play in resolving the failure, as such banks are uninsured and don’t hold deposits; rather, it would be up to the chartering authority, the OCC. But, the ICBA points out, the OCC hasn’t undertaken a receivership of an uninsured national bank in naerly 100 years, raising questions about the agency’s ability timely resolve the potential failure of a national trust bank.
Ultimately, the ICBA argues the OCC’s position, underpinned by the final rule and interpretive letter 1176, “creates a new category of non-fiduciary, non-depository national banks that do not fit within section 27(a). It opens a vast regulatory loophole, allowing crypto companies to fill many of the same functions as community banks, while evading the fundamental safeguards, obligations, and oversight of those banks.”
This “sweeping assertion of newfound power is wrong” and “fundamentally misinterprets the statutes,” the ICBA argues.
The ICBA’s suit argues that the OCC’s actions violated the National Bank Act and the Administrative Procedure Act and asks the court declare void and set aside the final rule and the interpretive letter. The ICBA further asks the court to block the OCC granting or conditionally approving charters based on the authorities and policies defined in the final rule and in interpretive letter 1176.
[Paid Subscriber Exclusive] OCC Fraudster’s Scathing Termination Letter, Mission Lane’s Credit Card Bank Charter, Amex’s AML Fine
Longtime readers of this newsletter may recall one of the more bizarre stories: the Office of the Comptroller of the Currency’s vanishing chief fintech officer.
Fintech Business Weekly first covered this in September 2023, flagging that the first-ever person appointed to the role, Prashant Bhardwaj, had quietly been removed from the bank regulator’s website with no explanation.
The circumstances around Bhardwaj’s appointment and removal were a bit odd: the OCC’s announcement of his appointment, in March 2023, touted his “30 years of experience serving in a variety of roles across the financial sector,” but didn’t publicly name a single former employer.
The announcement did specify two education credentials Bhardwaj purportedly held: a master’s degree from the University of Cincinnati and an MBA from the “International Management Institute Universiade de Brussels” — only, no institution by that exact name exists, and, Fintech Business Weekly was the first to report, it most likely referred to a similarly named unaccredited degree mill.
After the OCC turned over documents, including Bhardwaj’s resume, in response to a Freedom of Information Act request, it became clear that most of Bhardwaj’s background — including purported stints as the CIO at Huntington Bank and at Fifth Third — were fake.
Late last month, a long-forgotten about Freedom of Information Act request from The Information’s Michael Roddan shed some new light on the mystery, with the OCC turning over documents that included a memo from Bhardwaj’s boss, Grovetta Gardineer, terminating his employment at the agency.
The memo firing Bhardwaj is dated July 10, 2023 — just two days after Bhardwaj was arrested for DUI after crashing his Porsche into a stone wall in Dublin, Ohio, at around 2:00am.
Highlights from that termination memo, plus subprime credit card Mission Lane’s charter approval, and American Express’s AML fine after the paywall.
