ICBA's lawsuit asks post-Chevron courts whether 13 crypto trust charters fit a 1978 statute

Jonathan Gould wrote the interpretation at the center of this case, and he now runs the agency that has to defend it. As OCC general counsel in 2021 he signed Interpretive Letter 1176, saying national trust companies could provide certain cryptocurrency custody and related services ^[7]. That letter leans on a phrase Congress added to the National Bank Act in 1978, letting national banks focus narrowly on trust work "and activities related thereto" ^[6]. Forty-three years separate the statute from the letter ^[17].

Before 2024, under Chevron, a court would have deferred to the OCC's reading of those four words ^[2]. Now judges decide for themselves what the statute permits. They may weigh the agency's expertise and reasoning, but that expertise no longer binds them ^[5]. American Banker's assessment is that the change makes the plaintiffs' argument easier for courts to accept ^[2].

Joe Lynyak, a partner at Dorsey & Whitney, said the OCC used the 2021 letter as the base for a much larger regulatory change without going through the process substantive rulemaking requires ^[11]. "There's two primary arguments here: one is that the decision by the OCC and all of the pieces that they put together violates the Administrative Procedures Act, and the letter they relied upon, which is the OCC Letter 1176, effectively is a form of bootstrapping," Lynyak said ^[12]. The process claim, in his words, "stands on its own" ^[13], so it can succeed whether or not Chevron survived. The statutory claim is the one the 2024 ruling helps, and he thinks it is sound: "I think there's a very sound basis to say that the OCC has overstepped in this case by creating something that wasn't there before," he said ^[14].

Thirteen of the 21 charters the OCC approved or conditionally approved in Trump's second term went to crypto companies, according to ICBA's lawsuit ^[3]. That is about 62% ^[15]. The other eight ^[16] may be exposed too. Art Wilmarth, professor emeritus of law at George Washington University, draws the line around activity: "All national trust bank charters that authorize any type of nonfiduciary activities would be open to challenge, in my view," he said ^[20]. American Banker's report does not say how many of the 21 authorize such activities, or what assets their holders keep in them. National trust banks are not insured by the FDIC, and the rules for them can differ significantly from a traditional bank's ^[8]. I think that different rulebook is what holders wanted from a trust charter, and the suit challenges whether the OCC could let them use it beyond traditional trust work ^[1].

Wilmarth's outcome is the most severe. "The ICBA should prevail, given the complete lack of any statutory authority for the OCC's crypto trust bank regulation and charters," he said ^[18], adding: "I therefore expect that the regulation and the charters will be invalidated" ^[19]. A court could instead decide only the process claim. The OCC would lose on public comment and arbitrariness, and the meaning of "related thereto" would stay open. The plaintiffs could also find judges less willing to side with them. Ian Katz, managing director at Capital Alpha Partners, said trade groups "in recent years have had some success suing Democratic-led regulatory agencies for exceeding their statutory authority" ^[9]. "It will be interesting to see whether banks will get a similarly receptive judiciary when suing a Republican-appointed regulator," he said ^[10].

I think the threat is real and slow. American Banker expects the case to take years through trial and appeals ^[4]. For all of those years, a firm building custody or other services on one of these charters depends on a scope a judge may narrow. The view is wrong if a court, weighing the OCC's reasoning as it still may ^[5], reads "activities related thereto" broadly enough to cover crypto custody ^[6].