Banking and Finance Law Daily Wrap Up, DEPOSIT INSURANCE—ICBA objects to Morgan Stanley bid to form digital asset de novo bank, (Mar 23, 2026)

By A Bryan Gerepka

The banking association says it supports responsible innovation in financial services, but such innovation must occur within a regulatory framework that preserves the safety and soundness of the banking system and ensures fair competition across the banking sector.

Citing concerns about statutory authority, regulatory arbitrage, and risks to the banking system, the Independent Community Bankers of America (ICBA) urged the Office of the Comptroller of the Currency to deny Morgan Stanley's request to establish a digital-asset national trust bank.

On February 18, 2026, Morgan Stanley submitted an application to the OCC for a national bank charter to establish Morgan Stanley Digital Asset Trust, National Association (MSDTNA). The bank would provide custody services for digital assets.

In a March 18, 2026, letter to the agency, ICBA raised three main concerns about the firm’s application for a banking charter.

The Proposed Activities are Inconsistent with the Traditional Scope of Trust Bank Powers. According to ICBA, the proposed bank will provide services that exceed the traditional fiduciary activities of trust banks, such as trust administration, asset management, and custody of financial assets. The application stated that MSDTNA would provide custody of digital assets for Morgan Stanley clients, facilitate purchases, sales, swaps, and transfers of digital assets, and facilitate staking services, ICBA noted. These activities appear to involve transaction execution and participation in digital-asset markets, which extend well beyond traditional fiduciary services, ICBA wrote. However, the OCC lacks statutory authority to charter limited-purpose trust banks that engage in significant activities unrelated to permissible fiduciary activities, ICBA observed. If the OCC allows a national trust bank to engage in digital-asset transaction execution and staking services, such a move would represent a significant expansion of the traditional scope of trust banking and could set a precedent for further expansion of national trust bank powers, the group argued.

Approval of the Application Would Create Opportunities for Regulatory Arbitrage. Approving this application would create opportunities for regulatory arbitrage, ICBA stated, adding that egulatory policy should promote fair competition and consistent oversight, rather than creating pathways for certain institutions to avoid the safeguards applied to traditional banking institutions.

Uneven Regulatory Oversight. If approved, this type of digital-asset banking business model could encourage other financial institutions and fintech firms to pursue similar charter applications, ICBA stated. If the OCC permits certain institutions to conduct substantial digital-asset activities through specialized national trust banks that are not subject to the same regulatory expectations as insured depository institutions, such as community banks, the result could be uneven regulatory treatment across the banking sector.

ICBA warned that such developments risk creating a parallel regulatory regime for digital-asset activities within the banking system, undermining consistent prudential supervision. The OCC should not permit the national trust bank charter to be used as a mechanism for conducting substantial financial activities outside the regulatory framework that applies to insured banks.

Other concerns. According to the letter, concentrated exposure to digital-asset activities raises safety-and-soundness concerns. ICBA reiterated that the risks associated with complex financial products and financial contracts can create serious supervisory challenges when conducted by uninsured national trust banks. These risks are particularly concerning when an institution’s activities are concentrated in markets characterized by rapid technological change and evolving regulatory treatment, the group continued. As such, the OCC must ensure that any institution granted a national bank charter maintains a safe and sound risk profile consistent with the responsibilities associated with a federal bank charter.

ICBA also expressed concern that the OCC lacks tools to regulate de novo banks. While the OCC has adopted regulations governing the receivership of uninsured national banks, ICBA noted that the regulations, which are grounded in statutory authorities outlined in the National Bank Act, are outdated. The OCC does not have the same flexibility or range of tools necessary to manage the complexities presented by newer banking institutions, the group argued, adding that the Federal Deposit Insurance Corp.’s more modern regulatory framework is better equipped to regulate novel banking institutions. Moreover, the OCC has limited practical experience administering receiverships, having not served as a receiver since the FDIC was established in 1933. This lack of experience is especially concerning in situations where uninsured national trust banks engage in substantial activities beyond permissible fiduciary functions, particularly where those activities involve complex financial instruments or contractual arrangements, such as staking.

Companies: Independent Community Bankers of America; Morgan Stanley

RegulatoryActivity: BankingOperations Blockchain CommunityDevelopment DepositInsurance FinancialIntermediaries FinTech GCNNews