Why the Latest Wave of Crypto Firms Seeking US Bank Charters Raises Red Flags

World Liberty Financial (WLFI) became the latest firm on Wednesday to apply for a national trust bank charter. It joined digital asset companies like Circle, Ripple, Fidelity Digital Assets, BitGo, and Paxos in a move that would allow it to expand stablecoin services.

However, the announcement caused significant concern. Established banks argue that it represents an effort to secure federal recognition while sidestepping the stricter regulatory and supervisory requirements that apply to fully licensed national banks.

Trump-Backed WLFI Applies for Trust Charter

The Trump-backed crypto venture WLFI announced that its affiliate, WLTC Holdings LLC, has submitted a de novo application to the Office of the Comptroller of the Currency (OCC) to establish the World Liberty Trust Company, National Association (WLTC). 

The planned institution would function as a national trust bank with a primary focus on stablecoin-related activities. Such charters allow firms to operate across the US under a single federal framework, eliminating the need for individual state licenses. 

Trust banks differ from full banks in that they generally can’t take deposits or make loans. 

In anticipation of an approval, WLFI stated that WLTC will operate under full federal supervision and comply with the GENIUS Act, implementing strict AML, sanctions screening, and cybersecurity standards.

Customer assets will be segregated, with reserves independently managed, and operations subject to regular examinations. Mack McCain, General Counsel of World Liberty Financial, is set to serve as Trust Officer.

Banking industry groups have pushed back, warning that issuing trust charters in this way could increase systemic risk while eroding the integrity and original purpose of the charter framework.

Banking Groups Challenge OCC Trust Charters

One of the most contentious aspects surrounding the riskiness of these actions focuses on regulatory and supervisory gaps. 

While crypto firms may receive bank-like status, they are not subject to the full suite of prudential regulations that traditional banks face. These include comprehensive capital, liquidity, and risk-management standards. 

Given the increasing popularity of crypto firms seeking these licenses, banks have started to raise alarms.

“The conditional approvals of five national trust bank charters from the OCC further stretches the national trust bank charter beyond its statutory and historical purpose, endangers consumers, and creates institutions the OCC is not equipped to resolve in an orderly way,” said Rebeca Romero Rainey, the president and CEO of the Independent Community Bankers of America, in a December statement.

Traditional banks have also warned that this could create regulatory arbitrage, where crypto firms benefit from federal oversight without the same safeguards. In turn, consumer protection and financial stability become points of weakness. 

Meanwhile, national trust charters do not automatically include Federal Deposit Insurance Corporation (FDIC) insurance for customer assets in the same way retail banks do. 

If a crypto-chartered bank fails, customers might not have the same insurance protections, potentially leading to losses for individuals and institutions that misunderstand the risk. 

This could undermine trust in the broader financial system if widely used crypto-bank services experience stress or failure.

The OCC typically requires 12 to 18 months to evaluate applications for national trust bank charters, meaning WLFI is unlikely to receive a final decision before 2027.