Federal Trust Charters: Do They Shield Crypto Firms or Increase Regulatory Reach?

Alan Lane, the former chief executive of Silvergate Bank, contended that the bank’s decision to liquidate in March 2023 was driven by political and regulatory pressure rather than a lack of liquidity after a 70% withdrawal of demand deposits. The Federal Reserve’s inspector general later attributed the failure to concentration of crypto‑industry deposits, rapid growth, funding risks, and governance weaknesses.

Why Crypto Firms Are Pursuing Federal Trust Charters

New crypto‑focused institutions are applying for national trust charters from the Office of the Comptroller of the Currency (OCC). These charters provide a legal framework for fiduciary custody and place the firms under direct OCC supervision, while still relying on third‑party banks for fiat cash handling.

Key Developments

• December 2025: OCC conditionally approved trust‑bank applications for Ripple, Circle, BitGo, Fidelity Digital Assets, and Paxos.
• July 10, 2026: Circle received final approval for Circle National Trust, focusing on custody and future reserve management.
• April 2, 2026: Coinbase obtained preliminary conditional approval for Coinbase National Trust Company.
• Pending applications include Zerohash, Payward National Trust Company, Agora National Trust Bank, and EDX Trust (2026).

Risk Profile of Trust‑Bank Model

The trust‑bank structure reduces classic deposit‑run exposure by limiting activities to custody and asset safeguarding. However, firms remain dependent on external banks for fiat liquidity, and supervisory oversight can still impose activity restrictions, capital and liquidity requirements, and examiner conditions.

Potential Scenarios

1. Base case: Reputation‑risk limits hold; trust banks operate with strict examinations, requiring careful compliance planning.
2. Bull case: Continued OCC approvals and growing comfort among partner banks expand institutional custody capacity.
3. Bear case: Aggressive supervisory action on safety, soundness, or AML concerns slows approvals and tightens conditions.
4. Black‑swan: Major AML or partner‑bank failure triggers heightened enforcement, affecting market risk premiums.

Regulatory Landscape

Recent OCC rules, effective November 2026, limit the use of reputation risk in supervisory actions and focus enforcement on material financial harm. The agencies also introduced new standards for unsafe practices, preserving tools to address banking‑law violations while restricting actions based solely on political considerations.

These changes illustrate that while a federal trust charter can narrow the risk perimeter compared with a deposit‑funded bank, it does not eliminate supervisory pressure. The durability of crypto firms’ operations will depend on their ability to meet evolving compliance, capital, and liquidity standards under direct OCC oversight.