The community bank trade group sued the banking agency Friday, challenging the OCC’s authority to charter crypto firms outside the traditional banking framework.

During President Donald Trump’s second term, the OCC has approved or conditionally approved 21 national trust bank charters, with 13 of those for crypto companies, ICBA said in the lawsuit.

The national trust bank designation allows the companies to preempt many state law requirements and avoid federal requirements for depository institutions, the lawsuit said.

The OCC’s current posture “perversely allow[s] entities engaged in highly risky cryptocurrency and digital assets activities to enter the banking system under lightly regulated national charters rather than the more rigorously regulated traditional bank charter,” which puts community banks at a “severe competitive disadvantage,” ICBA’s lawsuit argues.

ICBA pointed to two small community bank members under $2.5 billion in assets that each spend about $1.5 million annually on regulatory requirements, including paying Federal Deposit Insurance Corp. assessments and complying with Community Reinvestment Act requirements, which trust banks aren’t required to do.

Those community banks have “each already lost hundreds of thousands of dollars in business this year alone to cryptocurrency companies that the OCC has conditionally approved for national trust bank charters,” the lawsuit alleges.

ICBA President and CEO Rebeca Romero Rainey, who has noted trust charters feed into concerns about deposit flight, said Congress didn’t create the national trust charter “as a side door into the banking system.”

“ICBA is asking the court to return the OCC to its statutory limits,” she said in a Friday statement .

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