Five crypto firms obtain federal trust bank licenses: a reversal from "outsiders" to "system participants"

In December 2025, an announcement from the Office of the Comptroller of the Currency (OCC) in the United States caused a stir in the crypto finance circle—five leading institutions—Ripple, Circle, Paxos, BitGo, and Fidelity Digital Assets—were simultaneously approved for federal trust bank charters. On the surface, this is just a regulatory license, but industry insiders understand: this marks a watershed moment for the crypto industry’s shift from being an outsider to a core participant within the financial system.

The reactions from CEOs speak volumes. Ripple’s Brad Garlinghouse straightforwardly said, “This is the highest standard of compliance,” while Circle emphasized that the new license grants them fiduciary responsibilities toward institutional clients. But the most telling reflection of the event’s essence is the anger from traditional banking sectors. The Bank Policy Institute (representing giants like JPMorgan and Bank of America) immediately issued a statement condemning the decision as “breaking down the firewall between banking and commerce.”

Trust Bank Charter ≠ Traditional Commercial Bank

Here, a common misconception needs clarification. The OCC did not approve a commercial banking license but a special trust bank license—an existing but relatively niche license type.

The key difference is: these five approved institutions cannot accept FDIC-insured deposits or issue commercial loans. It sounds like a scaled-down privilege, but for crypto enterprises, it’s actually a perfect fit.

Take Circle (issuer of USDC) as an example. Its business model is built on 100% reserve backing—each stablecoin is supported by corresponding USD assets or short-term government bonds, with no fractional reserves or credit creation involved. Under this model, FDIC insurance is unnecessary and would even add regulatory burdens.

The core advantage of a trust bank license is fiduciary responsibility—the law explicitly requires licensed entities to strictly segregate customer assets from their own funds, always prioritizing customer interests. After the FTX scandal involving misappropriation of customer assets, this safeguard has become the most valuable promise in the eyes of institutional investors.

The Real Gold Mine: Fedwire Direct Access

The apparent “bank” identity is just a facade; what’s truly valuable?

Direct access to the Federal Reserve’s clearing network.

Under the new license framework, these five institutions can apply to the Fed for a “master account”(master account). Once approved, they can connect directly to Fedwire or other federal clearing networks, enabling instant, irrevocable USD settlements—completely bypassing traditional correspondent banks.

It sounds technical, but the impact is fundamental.

Over the past decade, companies like Circle and Ripple have struggled to “detach from the correspondent banking system.” While they could process USD exchanges through traditional banks, each transaction involved multiple layers of bank clearing, each charging fees and exposing them to T+1 or T+2 settlement delays. More critically, if a correspondent bank unilaterally terminates the relationship (which happened frequently during the 2023 banking crisis), the entire USD channel could be cut off.

With direct federal connection, all that disappears. Settlement times drop from days to seconds, clearing costs reduce from multi-layer fees to a single Fedwire fee, meaning stablecoin issuers and cross-border payment providers could see operating cost reductions of 30%-50%.

For example, Circle manages nearly $80 billion in USDC reserves daily. The savings from direct Fedwire connection alone could amount to hundreds of millions of dollars annually.

The Subtle Upgrade of Stablecoin Status

When stablecoin issuers upgrade to federal trust banks, the nature of their products also undergoes subtle but significant change.

In the old model, USDC and RLUSD were essentially “digital certificates issued by tech companies,” with security entirely dependent on the issuer’s reputation and the stability of partner banks—Circle, for instance, faced a reserve crisis in 2023 when Silicon Valley Bank collapsed, with $3.3 billion assets temporarily “frozen” in traditional banking systems.

In the new model, the reserves backing stablecoins are stored in trust structures regulated by the OCC, legally isolated from the issuer entity. While this isn’t equivalent to a CBDC and doesn’t provide FDIC insurance, the combination of “100% reserves + federal regulation + fiduciary responsibility” makes these stablecoins’ credit ratings significantly higher than most offshore stablecoins.

A more practical benefit is in payment scenarios. Ripple’s on-demand liquidity product (ODL) was originally limited by banking hours and fiat channel availability. With direct connection to the federal clearing system, fiat-to-on-chain asset exchanges become seamless around the clock, greatly enhancing cross-border settlement reliability.

From Trump Policies to the “GENIUS Act” Regulatory Reversal

This outcome may seem sudden, but it is an inevitable result of the Trump administration’s shift in crypto policy.

Three or four years ago, such a result was almost unimaginable. During Biden’s term, especially after the FTX collapse, the crypto industry was under strict regulation and high uncertainty. The regulatory logic was simple: rather than spend effort regulating crypto risks, better to isolate them. The banking system was unofficially pressured to stay away from crypto—significant events like the closures of Silvergate Bank and Signature Bank marked this period. Industry insiders called this era “de-banking.”

By 2025, everything reversed. During his campaign, Trump repeatedly promised to make the US the “global hub of crypto innovation.” After taking office, crypto assets evolved from mere risk factors to tools for expanding the dollar system.

A key turning point was the signing of the (GENIUS Act) in July. This law explicitly grants legal status at the federal level to stablecoins and their issuers for the first time. The White House stated: “Regulated USD stablecoins promote US Treasury demand and strengthen the dollar’s international position in the digital age.”

This statement is significant—it redefines stablecoins from “risky assets” to “strategic financial tools.”

The (GENIUS Act) authorizes qualified non-bank entities to become “qualified payment stablecoin issuers.” It also sets strict rules: stablecoins must be backed 100% by USD cash or short-term US Treasuries, explicitly excluding algorithmic stablecoins. Most importantly, the law grants stablecoin holders a priority claim—even if the issuer goes bankrupt, reserves must be used first to redeem stablecoins.

Within this framework, OCC’s approval of crypto companies as federal trust banks becomes a natural step.

Wall Street’s Counterattack

OCC’s decision has angered the traditional financial sector, with the Bank Policy Institute’s statement almost a scream of fury.

BPI listed three major grievances. First, the disguise of regulatory evasion: these crypto companies obtain trust licenses but are engaged in substantive payment and clearing work—systemically important enough to rival medium-sized commercial banks, yet because they are “trusts” rather than “bank holding companies,” their parent companies(like Circle Internet Financial) evade the Fed’s unified regulatory scrutiny. This means code vulnerabilities, investment risks, and other blind spots could escape oversight.

Second, breaking the “firewall” between banking and commerce: laws originally prohibited corporate groups from controlling both banks and other commercial entities to prevent abuse of banking privileges. Now, allowing tech giants to own banks is akin to opening Pandora’s box. Moreover, these tech giants are not required to fulfill Community Reinvestment Act (CRA) obligations.

Third, systemic risk concerns: since new trust banks lack FDIC insurance, if stablecoins lose their peg—say, during a panic withdrawal—the traditional deposit insurance mechanism is essentially useless. This “naked” liquidity could trigger systemic crises under stress.

But BPI holds an even more important card—the Federal Reserve still controls the master account approval process.

OCC’s license is just a ticket; what makes these institutions valuable is the Fed’s issuance of master accounts. And the Fed retains independent judgment in this matter. There was a notable case: Custodia Bank(Wyoming) applied for a Fed master account but was rejected, even after obtaining a state license. The legal case ultimately did not overturn the decision.

This will be the next battleground. Traditional banks have lost the OCC-level fight and will now focus all their firepower on the Fed, demanding higher thresholds—such as AML standards comparable to JPMorgan, or requiring parent companies to provide additional guarantees.

Interwoven Interests and Uncertainties

This struggle is far from over; it has entered a more complex phase.

On one hand, the issue of state-level regulatory authority remains unresolved. The New York State Department of Financial Services ((NYDFS)) has long dominated crypto regulation, and now with expanded federal authority, new legal disputes over jurisdiction are likely.

On the other hand, while the (GENIUS Act) has taken effect, many operational details still need to be defined by regulators—capital adequacy requirements, risk isolation standards, cybersecurity thresholds, etc. These technical details will become the focus of the next round of power struggles.

Another often overlooked possibility is mergers and acquisitions. Banks could acquire crypto firms to enhance technological capabilities, and crypto companies might be incorporated into traditional finance. Who dominates whom? The landscape could be fundamentally reshaped.

But one thing is already certain: crypto finance has embedded itself into the US financial infrastructure. No matter how the battles unfold, “isolation” is no longer feasible. The approval of trust bank licenses for these five institutions marks the end of one era and the beginning of another. The only remaining question is how this new era will unfold.