One Sentence, Twenty-One Charters

Where did the OCC find the authority to charter 21 crypto companies as national banks in a single presidential term?

The authority didn't come from the GENIUS Act or any regulation designed for digital assets. It traces back to a single sentence added to federal banking law in 1978, written to settle a dispute about a company managing estates in New Jersey.

That sentence sat in 12 U.S.C. § 27(a) for 42 years without anyone reading it the way the OCC reads it now. In 2021, the agency's chief counsel wrote a 10-page letter arguing it means something broader than courts and the OCC's own prior interpretations had said.

In March 2026, a final rule codified that reading. By October, 21 charters had been granted. On October 2, the community banking industry sued to stop it.

The original grant

The Federal Reserve Act of 1913 gave the Fed authority to grant national banks permits for fiduciary work: acting as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates. The purpose was competitive parity. State-chartered banks and trust companies had been offering these services for decades. National banks were losing business to them.

The grant was narrow by design. It authorized specific roles, each defined by a legal duty to act in someone else's interest. The common thread was fiduciary obligation: managing assets you don't own, under a standard that puts the client's interest above your own.

In 1962, Congress transferred this authority from the Fed to the OCC. The statute, 12 U.S.C. § 92a, kept the same scope. National banks could act "as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, or in any other fiduciary capacity" permitted under state law. The word "fiduciary" appears throughout.

For 14 years, this framework went unchallenged.

The challenge

In 1976, the OCC evaluated a charter application for City Trust Services, N.A. Twelve banks objected. The OCC granted the charter anyway.

National State Bank of Elizabeth sued, arguing the OCC lacked authority to create a national bank whose sole purpose was trust work. The lower court agreed and ordered the charter revoked.

Congress stepped in. As part of the 1978 Financial Institutions Regulatory and Interest Rate Control Act, Section 1504 added a single sentence to 12 U.S.C. § 27(a):

A National Bank Association, to which the Comptroller of the Currency has heretofore issued or hereafter issues such certificate, is not illegally constituted solely because its operations are or have been required by the Comptroller of the Currency to be limited to those of a trust company and activities related thereto.

Fifty-nine words. It validated the City Trust Services charter and clarified that the OCC could limit a national bank's operations to trust company work. Congress was closing a specific gap exposed by a specific lawsuit.

The narrow reading

When the Third Circuit revisited the case in 1979, it reversed the lower court's decision. But it drew a boundary around what "trust company" meant in the new sentence. Judge Maris wrote:

We think that it must have been these specially permitted fiduciary powers to which Congress intended to refer when by its recent enactment it authorized the Comptroller to restrict the operations of a national bank to those of a trust company and activities related thereto.

And further: "It was the fiduciary operations carried on in the trust department of such a company or of a commercial bank to which reference must have been intended. Only by being so read does the statute have full meaningful effect."

The reasoning was structural. In most states, trust companies could conduct general banking. If "trust company" in the amendment meant everything a state trust company could do, the word "limited" would be meaningless. You'd be "limiting" a bank to doing everything a bank already does.

The OCC confirmed this reading twice. An unpublished 1980 interpretive letter and a 1983 letter (IL 265) both held that the OCC's authority under § 27(a) extended only to fiduciary activities as defined under § 92a.

That was the settled interpretation for four decades. Trust banks did trust work: managing assets under a fiduciary duty. The roughly 60 national trust banks operating under this framework collectively hold around $7 trillion in assets under administration, with $5.3 trillion in fiduciary accounts and $1.7 trillion in nonfiduciary custody.

The reinterpretation

On January 11, 2021, Jonathan Gould wrote Interpretive Letter 1176. Gould was the OCC's Senior Deputy Comptroller and Chief Counsel at the time, serving during the first Trump administration.

IL 1176 reads the same sentence and arrives at a different conclusion. Gould's argument: Congress didn't define "trust company" in § 27(a). The statute doesn't limit the term to fiduciary activities under § 92a. In the absence of a federal definition, the phrase should be construed to include "the activities of trust departments of banks as well as the activities of trust companies and trust banks authorized under the laws of the various states."

State trust companies do more than fiduciary work. Many offer non-fiduciary custody, asset servicing, and related financial activities. Under Gould's reading, a national trust bank chartered by the OCC can engage in any of those activities too.

The letter explicitly supersedes IL 265, the 1983 interpretation that had confirmed the narrow reading. It never went through notice-and-comment rulemaking. A 10-page letter from the chief counsel replaced 40 years of consistent interpretation.

IL 1176 also introduced a bootstrap mechanism. Under § 92a, fiduciary capacity includes "any other fiduciary capacity" permitted under state law. If a state defines crypto custody as a fiduciary activity, a national trust bank headquartered there can treat it as fiduciary too. The definition of what qualifies expands to match the most permissive state in the country.

Codification

Gould left the OCC in 2021 and returned as Comptroller in 2025.

In March 2026, the OCC finalized a rule amending 12 CFR 5.20, the regulation governing national bank chartering. The change: the phrase "fiduciary activities" was replaced with "the operations of a trust company and activities related thereto."

The OCC stated the revision "intends to neither expand nor contract the OCC's authority." But the old regulation said "fiduciary activities" and the new one says "operations of a trust company," and those scopes are different enough to be the entire argument.

The applications followed. Circle, Coinbase, Ripple, BitGo, Paxos, World Liberty Financial. Block applied for Builders Bank in September. Modern Treasury and Rain filed in October.

Twenty-one charters approved or conditionally approved, thirteen for crypto-related companies.

The lawsuit

On October 2, 2026, three days before Modern Treasury and Rain filed their applications, the Independent Community Bankers of America sued the OCC in federal court in Washington, D.C.

The ICBA's argument runs on two tracks. The textual claim: § 27(a) authorizes trust banks limited to fiduciary work. The Third Circuit said so in 1979. The OCC's own letters confirmed it for decades. IL 1176 and the March 2026 rule misread the statute.

Then the constitutional claim: the Major Questions Doctrine. Even if the statutory text were ambiguous, the doctrine requires Congress to speak clearly when an agency asserts authority over a question of vast economic and political significance. Chartering an entirely new category of non-fiduciary, non-depository national banks, regulated more lightly than community banks while preempting state consumer protection laws, qualifies.

ICBA President and CEO Rebeca Romero Rainey: "Congress did not create the national trust charter as a side door into the banking system for crypto firms seeking the credibility of a federal bank charter without the Community Reinvestment Act obligations, consolidated supervision, capital and liquidity standards, and FDIC insurance that apply to insured depository institutions."

The competitive asymmetry is concrete. A trust-chartered crypto custody firm avoids FDIC insurance premiums and CRA obligations. It still gets to call itself a national bank, supervised by the OCC, with federal preemption of state laws. Community banks competing for the same institutional custody clients face a regulatory cost structure the trust bank doesn't share.

The ICBA also raised resolution risk. If a trust bank fails, the FDIC has no role. Resolution falls to the OCC, which hasn't managed the receivership of an uninsured national bank in nearly 100 years.

Same text, different scope

Through this entire legal chain, the statutory text of § 27(a) stayed the same. The words haven't been amended, and Congress hasn't passed new legislation expanding the OCC's chartering authority for digital assets.

What changed was the interpretation. IL 1176 reads the same 59 words and finds a different boundary. The March 2026 rule propagates that reading into the regulatory text. Twenty-one charters follow.

The D.C. district court will decide whether the trust bank path stays open or closes, and with it, whether a 1978 amendment becomes permanent foundation for a category of institution Congress never debated.

The sentence was written to validate one charter for one trust company in New Jersey. Forty-eight years later, it's the legal authority underneath the entire crypto banking wave. The charters, the custody, the settlement, the infrastructure companies reaching for their own bank layer, all of it rests on whether 59 words can bear that weight.