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Crypto Journalist
Anas Hassan
Crypto Journalist
Anas Hassan
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Coinbase Chief Legal Officer Paul Grewal publicly condemned traditional banking groups to oppose the national card applications of the national trust bank of the crypto exchange, accusing them of prioritizing the protection of the protection of consumers.
The push from banking associations intensified this week as community banks and Wall Street lobbying groups mounted coordinated efforts to block crypto companies from securing federal banking licenses.
Grewal fired after the Independent Community Bankers of America urged federal regulators to deny Coinbase’s card application for its subsidiary, Coinbase National Trust Company.
“Imagine opposing a regulated trust card because you prefer crypto to remain…unregulated“, ” Grewal wrote on X, adding that bank lobbyists are trying to “digging regulatory moats to protect their own.“
Banking Groups Mounted Coordinated Opposition
The ICBA presented a detailed objection letter to the Office of the Comptroller of the Currency on November 3, arguing that Coinbase’s application fails to meet statutory chartering standards for several reasons.
The letter from the banking group states that the application shows fundamental deficiencies in governance, profitability, sustainability and the complexity of the reception, especially during bearish crypto markets when Coinbase and its subsidiary face simultaneous financial pressure.
The ICBA letter also challenges the legal validity of OCC Interpretive Letter 1176, which allows national trust banks to engage in non-trust activities beyond traditional trust services.
The banking group argues that this interpretive letter was issued without the required public notice and comment procedures under the Administrative Procedure Act, making it legally invalid as a basis for Coinbase’s application.
Meanwhile, a separate banking lobby is emerging in the stablecoin debate.
The American Bankers Association and 52 state bank associations have filed a common letter at the Treasury Department on November 4, urging strict enforcement of the GENIUS Act’s ban on stablecoin interest payments.
The coordinated response addresses what banks see it as a “slap” it allows digital asset platforms to circumvent the law by offering interest through affiliates rather than directly from stablecoin issuers.
Stablecoin Interest Debate Intensifies
Banking associations have warned that without a broad interpretation of the interest ban, digital asset platforms could exploit loopholes through high-yield rewards and incentives, undermining the law’s intent to keep stablecoins as payment instruments rather than investment vehicles.
Senator Mike Rounds first said Politico, the interest solution “seems like an end to the original legislation”.
At the same time, Federal Reserve Governor Christopher Waller stated that stablecoins should function as pure payment instruments, not interest deposits.
“It is not an investment vehicle. It is not a time deposit where you hold it to earn interest“, he said.
Banking groups argue that interest-bearing stablecoins could trigger a 25.9% loss in bank deposits, eliminating about $1.5 trillion in lending capacity and reducing small business and agricultural credit by $110 billion and $62 billion, respectively.
Community banks serving rural and underserved areas face a disproportionate impact from deposit flows to yield-generating stablecoins.
Faryar Shirzad, Chief Policy Officer of Coinbase dismissed banking issues, which state that the GENIUS Act explicitly allows third-party reward programs and distinguishes them from interest paid by the issuer.
“Congress answered this question“, Shirzad he wrotewhich suggest that the banking industry letter recognizes this distinction while attempting to reopen the established legislative intent.
Review Process and Industry Implications
The OCC is expected to take between 12 and 18 months to review Coinbase’s application, with public comments likely to influence the agency’s decision.
The agency is currently headed by Controller Jonathan Gould, a former legal head of Bitfury, who has criticized the reluctance of the banking sector to work with crypto companies.
Beyond Coinbase, similar opposition from the Bank Policy Institute targets trust app charter from Ripple, Circle, and Paxos. Anchorage Digital remains the only crypto company with an approved national trust bank card, granted in January 2021.
Looking ahead, the concentrated wave of resistance from the banking industry shows that traditional financial institutions see the pursuit of federal card crypto companies as a fundamental threat to their competitive position in custody and payment services.
