Banking and Finance Law Daily Wrap Up, FINANCIAL TECHNOLOGY—ICBA opposes Coinbase’s national trust bank charter application, (Nov 4, 2025)

By Shashi Kant BALLB, LLM.

ICBA urges regulators to reject Coinbase’s trust bank bid, citing legal flaws, weak oversight, limited transparency, and unresolved compliance concerns.

The Independent Community Bankers of America (ICBA) has urged the Office of the Comptroller of the Currency (OCC) to deny Coinbase Global, Inc.’s application to organize Coinbase National Trust Company (CNTC) as a national trust bank. In a Nov. 3, 2025, letter, ICBA asserts that the Coinbase application fails to meet the OCC’s chartering standards and violates the legal framework governing national trust banks.

Coinbase’s application for National Trust Charter. Coinbase filed its Interagency Charter and Federal Deposit Insurance Application on Oct. 3, 2025, seeking OCC approval to establish CNTC as a de novo, non-insured national trust company headquartered in New York City. CNTC would be wholly owned by Coinbase Global, Inc. and governed under Delaware law. The filing describes CNTC as an expansion of Coinbase’s institutional custody business, which is currently operated through Coinbase Custody Trust Company, LLC (CCTC), a New York State-chartered limited-purpose trust company. CNTC would offer Prime Vault, a segregated digital-asset storage solution using multi-party computation technology, and Prime Custody, an omnibus custody platform for institutional clients. The company also said CNTC would operate as a qualified custodian under the Investment Advisers Act of 1940 and may explore “next-generation” payment and smart-contract custody services.

ICBA alleges legal, procedural deficiencies. ICBA’s opposition focuses on what it describes as fundamental legal defects in the Coinbase application. The organization asserts that Coinbase’s reliance on OCC Interpretive Letter 1176 (IL 1176) violates the Administrative Procedure Act (APA) because the interpretive letter was issued without public notice or comment.

Issued in January 2021, IL 1176 permits national trust banks to engage in non-fiduciary activities that are otherwise permissible for national banks under 12 U.S.C. § 24 (Seventh), expanding the scope of activities beyond those allowed under 12 U.S.C. § 92a. ICBA said the letter amounts to a substantive rule under the APA, issued without the required rulemaking procedures, and that any OCC decision relying on IL 1176 would therefore be “arbitrary, capricious, and not in accordance with law.” ICBA argued that this interpretation conflicts with the Third Circuit’s 1979 ruling in National State Bank v. Smith, which held that national trust banks are limited to fiduciary activities specifically authorized under §92a. The association also noted that IL 1176’s expansion of trust bank powers circumvents the Bank Holding Company Act (BHCA), which exempts companies from bank holding company regulation only if their subsidiaries are “solely engaged in trust or fiduciary capacities.”

Call for greater transparency. ICBA further objected to the limited public disclosure in Coinbase’s filing. The organization said the publicly available portion of the application does not provide sufficient information for meaningful public review. The business plan, legal permissibility analysis, and risk and compliance programs were submitted as confidential exhibits, preventing the public from assessing whether CNTC can operate safely and in compliance with law.

Concerns over governance and oversight. The ICBA also objected to what it called a lack of independent governance at CNTC. Of the seven proposed board members, four are current Coinbase executives, and several hold dual roles with Coinbase Custody Trust Company (CCTC). All seven proposed senior officers, including CEO Rick Schonberg, CFO Alesia Haas, and Chief Risk Officer Caroline Tarnok, also hold concurrent roles within Coinbase or its affiliates. According to ICBA, this structure “prevents independent oversight” and creates potential conflicts of interest, particularly because CNTC would depend heavily on Coinbase’s enterprise-wide systems, risk framework, and shared services. The group said CNTC’s reliance on Coinbase’s management and infrastructure replicates compliance weaknesses previously identified by regulators.

Reference to prior enforcement actions. ICBA cited multiple enforcement actions and operational incidents involving Coinbase and its subsidiaries as evidence of deficient risk and control systems. The filing noted a January 2023 New York State Department of Financial Services consent order describing “wide-ranging and long-standing” anti-money-laundering failures, a July 2025 Connecticut Department of Banking consent order against CCTC for unlicensed money transmission, a 2024 U.K. Financial Conduct Authority fine for AML deficiencies, and 2021 Commodity Futures Trading Commission order imposing penalties for false reporting and wash trading. The organization also referenced Coinbase’s May 2025 cybersecurity incident, in which a coordinated campaign involving outside contractors led to the exfiltration of customer data and estimated losses between $180 million and $400 million. ICBA said the series of incidents demonstrates a persistent pattern of compliance and operational weaknesses that undermine Coinbase’s claims of robust risk management.

Financial viability and resolution risks. ICBA questioned the sustainability of CNTC’s business model, which it said would be narrowly concentrated in institutional digital-asset custody. The association said fee revenues tied to the value of digital assets would fluctuate with crypto markets, leading to potential losses during downturns. Because Coinbase’s revenues are subject to similar market conditions, ICBA said the parent company would be least able to support CNTC during periods of financial stress. The organization also expressed concern that the OCC’s receivership framework for uninsured trust institutions remains untested for a firm of CNTC’s proposed scale and complexity. ICBA said digital-asset custody poses unique technical challenges for asset recovery and resolution, raising questions about how CNTC would be resolved in the event of insolvency.

ICBA’s request for OCC action. ICBA asked the OCC to deny Coinbase’s application, arguing that it does not meet the standards of 12 C.F.R. § 5.20(f), which require that new national banks operate safely, soundly, and profitably while ensuring compliance with law. Alternatively, the group urged the OCC to release redacted confidential materials, extend the public comment period, and hold a public hearing.

Companies: Coinbase Custody Trust Company, LLC; Coinbase Global, Inc.; Independent Community Bankers of America

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