Federal Charters and Compliant Custody Under Siege: The Stablecoin On-Ramp Faces a Two-Front Attack

On the same day on both sides of the Atlantic, the institutional plumbing of the stablecoin era came under fire: US community banks sued the OCC to tear down the national trust-bank charter pathway for crypto firms, while ESMA proposed banning custody and transfer services for non-compliant stablecoins. The walls of the compliant market are closing in, defined by charters and custody.

ICBA Sues the OCC: Tearing Down the Federal Charter “Side Door” for Crypto Firms

On October 2, the Independent Community Bankers of America (ICBA), which represents the vast majority of US community banks (most with assets under $10 billion, many under $2.5 billion), sued the Office of the Comptroller of the Currency (OCC) and its Comptroller Jonathan Gould in the US District Court for the District of Columbia, case number 1:26-cv-03441. Under the Administrative Procedure Act, ICBA asked the court to declare unlawful and vacate the OCC’s National Bank Chartering rule published March 2, 2026, Interpretive Letter 1176 from January 2021, and the OCC’s February conditional approval of Protego Holdings.

ICBA’s core legal claim is that the OCC exceeded the authority granted by the National Bank Act by chartering national trust banks that “neither take deposits nor act chiefly as fiduciaries.” On ICBA’s reading, the Act allows the OCC to charter only three kinds of national bank: deposit-taking banks, bankers’ banks, and trust banks that provide fiduciary services. The contested technical question turns on a 1978 amendment to the National Bank Act, which states that “a national bank is not illegally constituted solely because the comptroller has limited it to trust business” — and whether that language can support charters for firms whose main business is not fiduciary at all.

ICBA also invokes the major questions doctrine, arguing that such broad power requires clear congressional authorization, and contends the rule is arbitrary and capricious because the OCC gave commenters only a two-page response, while the 2021 letter skipped the public notice-and-comment process federal law requires. The complaint counts 21 trust banks approved or conditionally approved under the current administration, at least 13 of them crypto companies (roughly 62%), and notes that the OCC “has not managed an uninsured bank receivership in nearly one hundred years.”

The OCC’s charter map for crypto firms is already substantial: in December 2025, Circle, Ripple, BitGo, Fidelity Digital Assets and Paxos received conditional approvals, with Circle converting to final approval in July; February 2026 added Stripe-owned Bridge, Crypto.com and Protego; Coinbase followed on April 2 and Nomura’s Laser Digital on May 29; the Trump-family-backed World Liberty Trust Company received conditional approval in August; and Agora, Catena Labs and Bastion followed on September 18. ICBA asks the court to vacate only Protego’s approval as a test case and does not seek to undo the charters already granted to Coinbase, Circle or others, but the injunction it seeks would stop the OCC from approving any new charters under the rule.

The real force of this lawsuit lies in stablecoins. The GENIUS Act names “uninsured national banks chartered by the OCC” as one of three kinds of entity that can become a federal qualified payment stablecoin issuer (the others being insured banks and state-chartered entities), while state-qualified issuers are capped at $10 billion of outstanding stablecoins. In other words, for an issuer seeking scale, a national trust charter is the easier path than the state route. ICBA counters that the GENIUS Act does not take effect until January 18, 2027 (or 120 days after final regulations, whichever comes first), and so cannot cure the charters the OCC has already granted. The OCC’s own final GENIUS rule has been with the White House Office of Information and Regulatory Affairs (OIRA) since August 27.

The OCC declined to comment on the litigation; the Bank Policy Institute said firms that want to engage in traditional banking “should seek full-service banking charters,” and that trust charters should go only to firms confined to trust activities. If the court rules for ICBA, existing charters could be reassessed and pending applications stalled, potentially pushing crypto firms back to a patchwork of state licensing regimes — fragmenting institutional custody liquidity and favoring larger, well-capitalized players, an ironic twist for community banks seeking to defend their traditional perimeter.

ESMA Proposes Ending Custody and Transfers for Non-Compliant Stablecoins: The EU Closes In From “Trading” to “Safekeeping”

On the other side of the Atlantic, the European Securities and Markets Authority (ESMA), in its September 30 response to the European Commission’s MiCA review, put forward a more penetrating claim: extend the restriction on stablecoins that fail MiCA’s applicable requirements beyond trading to custody and transfers. Under this proposal, every licensable crypto-asset service involving a non-compliant stablecoin would be prohibited — a customer who has stopped trading would no longer be able to leave such tokens with a licensed custodian, nor have the custodian move them on their behalf. This goes a step beyond ESMA’s January 17, 2025 position, which distinguished services that “offer non-compliant stablecoins to the public or admit them to trading” from simply holding or transferring them, and allowed the latter to continue.

ESMA argues that drawing the line activity by activity “creates disparities between compliant and non-compliant issuers and facilitates regulatory arbitrage.” It wants a broader asset-compliance test to replace the activity-by-activity distinction. The legal hooks come from MiCA’s Article 3 definitions: custody covers safekeeping or controlling clients’ crypto-assets or their means of access, including private keys; transfers cover moving assets on a client’s behalf from one ledger address or account to another. Both are explicitly listed services, with Article 59 requiring providers to be authorized and Article 82 setting client-agreement requirements for transfers — and a provider’s license and a token’s compliance are separate questions.

A historical example shows the importance of this “middle ground”: in March 2025, Binance announced it would remove trading pairs for nine tokens for European Economic Area users by March 31 while keeping deposits, withdrawals, conversions and custody available. ESMA’s January 2025 stance left room for exactly this “delist trading, keep holding” transition. The new September response would erase that middle ground entirely: for a non-compliant stablecoin, a licensed custodian’s continued safekeeping would itself fall within the prohibition.

But the proposal leaves a glaring gap on how customers can exit safely. Section 3.2 of ESMA’s submission sets no implementation date, withdrawal exception or wind-down mechanism. Yet MiCA’s Article 75 already requires custodians to return clients’ crypto-assets or their means of access as soon as possible and to segregate client assets; a February 18, 2026 answer from the Commission via ESMA further requires that the asset returned be the same type the client held when requesting withdrawal, with conversion allowed only if the client asks for it and the provider has the required permission. If the new ban covers both custody and transfers without exception, lawmakers must reconcile how a provider is told to stop handling an asset while still lawfully returning it. ESMA emphasizes it does not ban personal ownership, freeze tokens or mandate conversion — but whether an individual may retain an asset and whether a licensed business may hold or move it for that customer are different questions.

A useful benchmark comes from a July 2026 academic study (Borri & Shakhnov): across 14 centralized exchanges, on the venues classified as “regulated-facing” (Bitstamp, Coinbase, Gemini, Kraken), USDC’s share of combined USDT+USDC trading rose about six percentage points around April 1, 2025, while USDT trading volume fell about 20%. This shows that “compliant substitution” is already happening at the trading level — but trading share does not measure EU custodial balances, and the impact of the ESMA proposal on global stablecoin demand remains hard to quantify. Meanwhile Circle is lobbying in the same MiCA review for more flexibility in high-quality liquid assets and bank deposits as reserves, so the two forces (ESMA tightening and Circle loosening) are pulling in opposite directions.

Key Takeaways for Practitioners