Coinbase Chief Legal Officer Paul Grewal publicly condemned traditional banking groups for opposing the crypto exchange’s national trust bank charter application, accusing them of prioritizing protectionism over consumer protection.
The pushback from banking associations intensified this week as both community banks and Wall Street lobbying groups mounted coordinated efforts to block crypto firms from securing federal banking licenses.
Grewal fired back after the Independent Community Bankers of America urged federal regulators to deny Coinbase’s charter application for its subsidiary, Coinbase National Trust Company.
“Imagine opposing a regulated trust charter because you prefer crypto to stay… unregulated,” Grewal wrote on X, adding that bank lobbyists are attempting to “dig regulatory moats to protect their own.“
Banking Groups Mount Coordinated Opposition
The ICBA submitted a detailed opposition letter to the Office of the Comptroller of the Currency on November 3, arguing that Coinbase’s application fails to meet statutory chartering standards on multiple grounds.
The banking group’s letter claims the application exhibits fundamental deficiencies in governance, profitability, sustainability, and receivership complexity, particularly during crypto bear markets when both Coinbase and its subsidiary would face simultaneous financial pressure.
The ICBA letter also challenges the legal validity of OCC Interpretive Letter 1176, which permits national trust banks to engage in non-fiduciary activities beyond traditional trust services.
The banking group contends that this interpretive letter was issued without the required public notice and comment procedures under the Administrative Procedure Act, rendering it legally invalid as a basis for Coinbase’s application.
Meanwhile, a separate banking lobby emerged in the stablecoin debate.
The American Bankers Association and 52 state banking associations submitted a joint letter to the Treasury Department on November 4, urging strict enforcement of the GENIUS Act’s prohibition on stablecoin interest payments.
The coordinated response addresses what banks view as a “loophole” allowing digital asset platforms to circumvent the law by offering interest through affiliates rather than directly from stablecoin issuers.
Stablecoin Interest Debate Intensifies
The banking associations warned that without a broad interpretation of the interest ban, digital asset platforms may exploit loopholes through high-yield rewards and incentives, which would undermine the law’s intent to keep stablecoins as payment tools rather than investment vehicles.
Senator Mike Rounds previously told Politico the interest workaround “looks like an end-run on the original legislation.”
At the same time, Federal Reserve Governor Christopher Waller stated stablecoins should function as pure payment instruments, not interest-bearing deposits.
“It’s not an investment vehicle. It’s not a time deposit where you’re holding it to earn interest,” he said.
The banking groups argue that interest-bearing stablecoins could trigger a 25.9% loss in bank deposits, eliminating approximately $1.5 trillion in lending capacity and shrinking small business and farm credit by $110 billion and $62 billion, respectively.
Community banks serving rural and underserved areas would face disproportionate impact from deposit outflows to yield-generating stablecoins.
Coinbase Chief Policy Officer Faryar Shirzad dismissed the banking concerns, stating that the GENIUS Act explicitly permits third-party rewards programs and distinguishes them from issuer-paid interest.
“Congress answered this question,” Shirzad wrote, suggesting the banking industry’s letter acknowledges this distinction while attempting to reopen settled legislative intent.
Review Process and Industry Implications
The OCC is expected to take between 12 and 18 months to review Coinbase’s application, with public comments potentially influencing the agency’s decision.
The agency is currently led by Comptroller Jonathan Gould, a former chief legal officer of Bitfury, who has criticized the banking sector’s reluctance to work with crypto companies.
Beyond Coinbase, similar opposition from the Bank Policy Institute targets trust charter applications from Ripple, Circle, and Paxos. Anchorage Digital remains the only crypto firm with an approved national trust bank charter, granted in January 2021.
Looking forward, the concentrated wave of banking industry resistance shows that traditional financial institutions view crypto firms’ pursuit of federal charters as a fundamental threat to their competitive position in custody and payment services.
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