As crypto giants Ripple and Circle push deeper into the financial mainstream with applications for U.S. national trust bank charters, a formidable alliance of traditional banking groups is pushing back. The move by these stablecoin issuers to become officially recognised custodians of their reserves has sparked concern among Wall Street lobbyists, who fear a seismic shift in the nature of deposit-taking and a potential threat to the traditional banking system.

Crypto Firms Seek National Trust Bank Status

Ripple and Circle, issuers of RLUSD and USDC respectively, have both applied for national trust bank charters from the Office of the Comptroller of the Currency (OCC). These charters would not allow them to accept traditional deposits or issue loans like commercial banks, but they would grant the legal right to custody digital assets, manage reserves, and offer related financial services.

This strategic step would allow Circle to directly manage the reserves backing its stablecoin USDC, while Ripple plans to do the same with RLUSD. If approved, these companies could operate under federal regulatory oversight while avoiding some of the compliance burdens borne by full-service banks.

Wall Street Sounds the Alarm

Traditional banking institutions, however, are far from comfortable with the prospect. In July, the American Bankers Association (ABA), along with several other financial lobby groups, sent a formal letter to the OCC, urging it to delay the approval of any such charters. The letter cited applications not only from Circle and Ripple but also from Fidelity Digital Assets and Protego.

The ABA argued that granting such charters could “represent a fundamental departure from existing OCC precedent” and raised “significant policy and legal questions” that need further exploration. Their stance is clear: stablecoin companies are attempting to gain the privileges of banks without taking on the corresponding obligations.

Following this, the Independent Community Bankers of America (ICBA) added its voice to the opposition, directly targeting the charter applications of Ripple and Circle. The ICBA highlighted that although these entities would legally be barred from taking deposits, by managing stablecoin reserves they effectively provide a service that mimics deposit accounts.

The Stablecoin Threat to Traditional Deposits

At the heart of the controversy lies a core concern, deposit displacement. Traditional banks rely heavily on customer deposits as a source of funding, and stablecoins like USDC and RLUSD offer a functionally similar product: a digital asset pegged to the U.S. dollar, easily transferable and usable for payments.

Unlike bank deposits, however, stablecoins are not covered by the Federal Deposit Insurance Corporation (FDIC). That means users who hold USDC or RLUSD are not guaranteed protection up to $250,000 in the event of insolvency. Yet, due to their utility and ease of use, stablecoins continue to grow in popularity, potentially pulling capital away from the banking sector.

The ICBA warned that this could “drain deposits out of the banking system,” destabilising traditional financial models without subjecting crypto firms to the same insurance premiums, reserve requirements, or compliance standards.

Regulatory Tensions and the Road Ahead

The OCC, caught between innovation and systemic risk, must now decide whether to approve the trust bank applications. The outcome could define the relationship between crypto-native firms and the U.S. financial system for years to come.

On one side are stablecoin companies aiming to legitimise and scale their operations within existing regulatory frameworks arguing for innovation, efficiency, and consumer choice. On the other are banking institutions defending their regulatory turf and financial stability, warning against a two-tiered system that allows tech companies to bypass hard-won compliance structures.

This clash reflects a broader tension in financial policy: how to integrate digital assets without compromising the safeguards built after past financial crises. Whether Ripple and Circle succeed or fail in their bid, one thing is certain, the boundaries between traditional finance and crypto are increasingly blurring, and regulators must move swiftly to keep pace.

As Ripple and Circle attempt to reshape how financial infrastructure operates in the age of blockchain, their trust bank charter applications have triggered a full-blown response from Wall Street’s most influential voices. The debate is not just about charters, it’s about who controls the future of money, and under what rules.