Gould says trust charters have long had nonfiduciary scope

• Key insight: Comptroller of the Currency Jonathan Gould says national trust banks have always been allowed to perform certain non-fiduciary functions and that custodying digital assets is no different.
• Supporting data: New bank applications fell from over 100 per year in the 1990s to about four annually in recent decades.
• Forward look: Gould says the OCC will continue individual reviews of digital asset firms' applications despite growing pushback from community banks.

Comptroller of the Currency Jonathan Gould Monday pushed back against concerns that the Office of the Comptroller of the Currency's recent wave of trust charter applications from big tech companies reflects an alteration of the charter's original purpose. 

In his speech at the Blockchain Association Policy Summit in Washington Monday, Gould said national trust banks have long been permitted to engage in certain non-fiduciary functions and argued the agency is well equipped to manage the risks posed by new asset classes offered by the largest fintech companies in the country.

"Although the proposed activities of some new charter applicants — specifically those in the digital or fintech spaces — could be viewed as new activities for a national trust bank, custody and safekeeping services have been happening electronically for decades," Gould said. "For example, banks — including current national trust banks — routinely hold rights by electronic means to company shares in custody for their customers. There is simply no justification for considering digital assets differently."

Gould highlighted the importance of cultivating a "diversity" of banks, arguing that new ideas, products and services, including crypto, rely on competition from newly formed institutions, which in turn drives consumer choice and innovation. Most of all, he says regulators should not prohibit banks from engaging with digital assets just because the technology is new, noting that embracing new products is essential to keeping the system current.

He opened with a recap of the sharp decline in new bank applications over the past decade, pointing out that the industry went from more than 100 applications per year in the 1990s to roughly four per year from 2011 to 2024. Demand, he said, wasn't the constraint; rather, regulators had grown overly strict and often signaled to would-be organizers that charter applications were unwelcome.

"Regulators too often gave would-be organizers clear signals that applications for federal bank charters and federal deposit insurance were not welcome, would be indefinitely delayed, and would ultimately be denied if not withdrawn," Gould said. "The regulators' myopic decision to cut off the lifeblood of new charters into the financial system was not legally justifiable and contributed to a less dynamic and competitive banking industry."

Gould notes that the agency received 14 new bank charters this year, including from heavy-hitting crypto firms like Coinbase, Circle, Ripple and Paxos. Palmer Luckey-backed Erebor bank received conditional approval in November, only months after it applied in June.

Gould said the wave of applications was not only welcome, but healthy for the banking industry and a return to form for the OCC.

"This increase signals healthy competition, a commitment to innovation and should be encouraging to all of us," Gould said. "Further, it is a return to the norm for the OCC and consistent with prior experience and practice."

OCC's current national trust charter wave stems back to interpretive letter 1176, which was authored in 2021 by Gould, who was serving as OCC General Counsel at the time. That interpretive letter allowed trust banks to engage in "activities that are non-fiduciary in nature, such as non-fiduciary custody."

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Gould has defended his involvement in the letter that he says merely "clarified" the agency's stance on national trust charters and rejected community bank advocates' claim that Gould expanded the scope of the charter to cover non-fiduciary business. Gould situates the current rush of mega crypto companies vying for national trust banks in the OCC's storied history of supervising trusts, noting that any application, then or now, is judged case-by-case under the same statutory factors.

Community bank advocates say the 2021 letter did open the door to non-fiduciary activities by allowing trust banks to engage in functions like non-fiduciary custody that they argue Congress never expressly authorized. Trust companies should be limited to their historically niche fiduciary functions, such as estate management, which "do not compete with commercial banks because they do not lend or offer deposit accounts to retail customers," ICBA wrote last month in a letter opposing an application by Sony. 

In July, the American Bankers Association sent a letter to the OCC urging the agency to pause its review of these applications pending a broader review of whether these applicants' business plans align with the purpose of the national trust charter.