Five US cryptocurrency institutions approved for federal trust bank licenses: a historic transformation is coming to the US dollar system

In December 2025, a modest approval announcement from the Office of the Comptroller of the Currency (OCC) in Washington sent ripples through the financial industry. Five crypto asset companies—Ripple, Circle, Paxos, BitGo, and Fidelity Digital Assets—were officially approved to become federal trust banks. The true significance of this decision goes far beyond the surface “banking license”—it marks a pivotal turning point for the entire digital financial industry, transitioning from the fringes of the financial system into the core of federal regulation.

What Does a Federal Trust Bank License Mean

Many misunderstand the implications of this approval. What was granted is not a traditional commercial banking license, but a National Trust Bank license—a type of license long existing within the US banking system, yet rarely noticed by outsiders.

“Federal Privileges” in the Dual System

US banking regulation adopts a state-federal dual track system. Holding a federal banking license means being directly supervised by the US Department of the Treasury, with exemptions from meeting the diverse requirements of individual states. This system originates from the 1864 National Bank Act and is a key tool in establishing a unified financial market in the US.

For crypto companies, this shift is crucial. Previously, even industry leaders like Circle or Ripple had to obtain remittance licenses (MTL) in each of the 50 states to operate legally nationwide—facing a maze of compliance requirements. The federal trust bank status signifies a unified compliance standard, a nationwide business passport, and a qualitative upgrade in regulatory authority.

Why Not a “Full Commercial Bank”

These five institutions cannot accept FDIC-insured deposits or issue commercial loans. Traditional banking organizations (such as the Bank Policy Institute) criticize this as “unequal competition.” But for crypto issuers, this structure fits perfectly.

Take USDC issuer Circle or RLUSD issuer Ripple as examples; their business logic is based on a 100% reserve system. Stablecoins do not expand credit or adopt fractional reserve models, thus avoiding systemic risks typical of traditional banks. In this context, FDIC insurance is not only unnecessary but also adds regulatory burdens.

More importantly, the essence of the trust bank license—fiduciary duty—means that legally, the licensed entity must strictly segregate customer assets from its own funds, prioritizing customer interests. After the FTX customer asset misappropriation scandal, this has profound implications for the entire crypto industry: asset segregation shifts from a company promise to a federally mandated legal obligation.

Upgrading from “Custodian” to “Payment Hub”

OCC Director Jonathan Gould explicitly stated that the new federal bank access will “provide consumers with new products, new services, and sources of credit, strengthening the vitality, competitiveness, and diversity of the banking system.” This creates a political foundation for integrating crypto companies.

The key breakthrough is that the OCC grants federal trust banks the right to apply for access to the Federal Reserve System’s payment network. The real goal is not the “bank” title itself, but direct access to the central bank’s clearing network.

For example, Paxos, despite establishing a compliance model under strict regulation by the New York State Department of Financial Services, cannot directly join the federal payment network. The new structure explicitly allows these institutions to continue issuing stablecoins, tokenizing assets, and providing custody services. This means: Stablecoin issuance and asset tokenization are officially recognized as legitimate “banking activities.”

Once implemented, these institutions will be able to connect directly to Fedwire or CHIPS, without relying on traditional commercial banks as intermediaries. From “asset manager” to “direct payment network node”—this is the most structural breakthrough in the entire regulatory transformation.

Why Is This License So Valuable

The core value of the federal trust bank license is not in the “bank” identity itself, but in opening the channel to the Federal Reserve System’s clearing infrastructure. This is precisely what Ripple CEO Brad Garlinghouse called a “major advancement,” and it is also the root of discomfort among traditional banking lobbies (BPI). For the former, it means increased efficiency and certainty; for the latter, it signifies a redistribution of long-standing monopoly over financial infrastructure.

What Does Direct Access to the Fed Mean

Previously, crypto companies were always on the “periphery” of the US dollar system. Whether it was Circle’s USDC or Ripple’s cross-border payment products, any dollar settlement ultimately required a commercial bank intermediary—known as “correspondent banking.” On the surface, this was just a lengthy process, but in reality, it created three major issues.

First is uncertainty of rights. Over the years, banks have repeatedly unilaterally cut off services to crypto companies. Once a correspondent bank withdraws, the fiat channel for the crypto company is instantly severed, halting business. This is the true nature of “de-banking.”

Second is cost and efficiency dilemmas. Under the correspondent banking model, each transaction passes through multiple bank clearings, each charging fees and causing delays. For high-frequency payments and stablecoins, this cost structure is unacceptable.

Third is settlement risk. Traditional banking systems often operate on T+1 or T+2 modes, with “in transit” funds locking liquidity and exposing credit risk. During the Silicon Valley Bank collapse in 2023, Circle had about $3.3 billion USDC reserves at the bank, which was temporarily “in limbo”—a lesson that still warns the industry.

The trust bank identity rewrites this architecture. At the systemic level, licensed companies can apply to open a “main account” at the Fed. Once approved, they can directly connect to Fedwire and other federal clearing networks, enabling real-time, irrevocable dollar settlements, completely bypassing intermediaries. This means that in the critical dimension of clearing, Circle and Ripple are now on the same system level as JPMorgan Chase and Citibank.

Not Just Cost Optimization, But Structural Scale Savings

Obtaining a main account brings about structural rather than marginal economic benefits. The core is that direct access to Fedwire completely eliminates multiple layers of intermediaries and their associated fees. Based on industry practices and 2026 Fedwire official fee rates, calculations show that in high-frequency and large-value transactions (such as stablecoins and institutional payments), this model can reduce total clearing costs by 30%-50%.

Cost savings come from two levels:

1. Direct fee rate advantage: Fedwire charges for large-value payments are much lower than commercial bank wire fees.
2. Structural simplification: Eliminating fees related to correspondent banks, account maintenance, and liquidity management.

For example, Circle processes nearly $80 billion daily in USDC reserves. If it gains direct access, annual savings on channel fees alone could reach hundreds of millions of dollars. This is not a minor optimization but a fundamental reshaping of the business model. Therefore, the cost competitiveness brought by the main account will become a key competitive advantage for stablecoin issuers in rates and operational efficiency.

Redefining the Legal and Financial Status of Stablecoins

When stablecoin issuers operate as federal trust banks, the status of their products also changes. In the old model, USDC or RLUSD were more like “digital certificates of a tech company,” with security relying on the issuer’s management and bank partners. Under the new structure, the reserves backing stablecoins are placed within a trust system under OCC federal regulation, legally fully segregated from the issuer’s assets.

This is not equivalent to a CBDC, nor does it involve FDIC insurance, but the combination of “100% reserves + federal regulation + fiduciary duty” grants stablecoins a credit rating higher than most offshore stablecoins.

The more intuitive effect is on the payment layer. Ripple’s ODL (On-Demand Liquidity) product has long been limited by bank operating hours and fiat channel availability. Entering the federal clearing system will make fiat-to-on-chain asset conversions 24/7 seamless, greatly improving cross-border settlement reliability.

Market Response Reflects Rational Expectations

Despite being regarded as a milestone by the industry, the market response has been subdued. Prices of XRP or USDC-related assets have not fluctuated significantly. But this is not to underestimate—the market views this as a long-term institutional transformation rather than a short-term speculative opportunity.

Ripple CEO Brad Garlinghouse called this “the highest standard of stablecoin compliance,” emphasizing that RLUSD is now under both federal (OCC) and state (NYDFS) dual regulation, and directly challenged the banking lobby: “Your anti-competition tactics are now exposed. You claim the crypto industry does not follow rules, but now we are directly under OCC regulation. What are you afraid of?”

Circle’s official statement pointed out that the national trust bank license will fundamentally change the trust paradigm for institutions, enabling issuers to provide legally fiduciary digital asset custody services for institutional clients. Both parties’ statements boil down to one point: from “financial service users” to “participants in the financial system”—crypto finance enters a new era. This federal trust bank license is not just a permit but a secure channel for institutions hesitant due to regulatory uncertainty to participate long-term.

The “Golden Opportunity” of the Trump Era and the “Genius Act”

To understand today’s achievement, one must look back three or four years to the difficulties at that time. It was almost unimaginable that crypto companies would be recognized as “banks” by the federal government by the end of 2025. This possibility did not stem from technological breakthroughs but from a fundamental political and regulatory shift. The return of the Trump administration and the passage of the “Genius Act” jointly opened the door for crypto finance to integrate into the federal system.

From “De-banking” to Systemic Acceptance

During Biden’s presidency, the crypto industry was under strict regulation and high uncertainty. Especially after the 2022 FTX bankruptcy, regulatory focus shifted to “risk isolation,” with banks being asked to stay away from crypto activities. The industry called this period “de-banking,” and some Congress members even used phrases like “second round of suppression.” According to the House Financial Services Committee investigation report, many banks ceased cooperation with crypto companies under informal pressure from regulators. Silvergate Bank and Signature Bank’s withdrawals exemplified this trend. The logic at the time was simple and crude: Better to isolate crypto risks from the banking system than to regulate them.

In 2025, this logic was completely reversed. During his campaign, Trump repeatedly publicly supported crypto industries, promising to make the US a “global crypto innovation hub.” After regaining power, crypto assets were no longer seen merely as risk sources but integrated into broader financial and strategic agendas. The fundamental shift was that stablecoins began to be understood as tools to strengthen the US dollar’s international position. The White House, in its statement on signing the “Genius Act,” explicitly pointed out that regulated US dollar stablecoins could boost US Treasury demand and enhance the dollar’s global influence in the digital age. This effectively redefined the role of stablecoin issuers within the US financial system.

The Institutional Framework of the “Genius Act”

In July 2025, Trump signed the “Genius Act.” This was the first federal law establishing clear legal status for stablecoins and related institutions. The law directly allows qualified non-bank institutions that meet certain conditions to obtain “qualified payment stablecoin issuer” status, under federal regulation. This opened a systemic pathway for companies like Circle and Paxos, long outside the traditional financial system.

More importantly, the law set rigid reserve requirements: stablecoins must be 100% backed by US dollars in cash or short-term US Treasuries. This effectively excludes algorithmic stablecoins and risky assets, aligning perfectly with the trust bank “no deposits, no loans” model.

Additionally, the law established priority redemption rights for stablecoin holders: even if the issuer goes bankrupt, reserves must be prioritized for stablecoin buybacks. This greatly reduces regulatory concerns and boosts confidence among institutional clients.

Within this framework, the OCC’s issuance of federal trust bank licenses to five crypto companies becomes a natural extension of the law.

The Defensive Lines and Power Struggles in Traditional Finance

For the crypto industry, this is a breakthrough; for Wall Street, an invasion. The OCC’s approval of five crypto companies as federal trust banks was not universally welcomed but rather triggered fierce resistance from traditional banking alliances, with the Bank Policy Institute (BPI) leading the charge. The “old banks” versus “new banks” war has just begun.

BPI’s Three Major Counterattacks

BPI represents giants like JPMorgan Chase, Bank of America, and Citibank. After the OCC decision was announced, its leadership immediately launched sharp criticism, touching on deep-seated regulatory philosophical differences.

First, “Arbitrage under the guise of trust.” BPI accused crypto companies of obtaining “trust” licenses only on the surface, while actually engaging in core banking activities—payments and clearing—with systemic importance potentially exceeding that of many mid-sized banks. But because of the trust license status, their parent companies (such as Circle Internet Financial) escape the comprehensive supervision of the Federal Reserve, meaning regulators cannot scrutinize software development or parent company investments—if a code bug causes losses, it becomes a regulatory blind spot.

Second, “Undermining firewalls between banking and commerce.” BPI warned that allowing Ripple, Circle, and other tech firms to hold banking licenses destroys the protective separation that shields the financial system from industrial giants. More infuriating is the unequal competition: tech firms can leverage social media and data monopolies to squeeze out banks, yet they are not required to fulfill community reinvestment obligations (CRA).

Third, “Lack of safeguards against systemic and moral hazard.” Since these new trust banks do not have FDIC insurance, if stablecoins de-peg and cause panic, the traditional deposit insurance system would not activate. BPI claims this could rapidly evolve into a 2008-style systemic crisis, lacking a “safety net.”

The Fed’s Last Bastion

The OCC’s approval is not the end. For these five new “federal trust banks,” the final and most critical step to access the federal payment system—the approval of a Fed main account—still lies with the Federal Reserve.

Although the OCC recognizes their banking status, under the dual system, the Fed retains independent discretion. Previously, Wyoming’s crypto bank Custodia Bank lost a lawsuit and was denied a main account, illustrating a huge gap between “license” and “Fedwire access.”

This will be the next battleground for traditional bank lobbying. Unable to prevent the OCC from issuing licenses, BPI will exert full pressure on the Fed, demanding stringent main account conditions—such as proving AML standards comparable to JPMorgan or requiring parent company guarantees.

For Ripple and Circle, the real race has just begun: holding a license but lacking a main account still means relying on correspondent banks, and the “national bank” status is thus significantly devalued.

Conclusion: The Road Ahead Is More Than a Rules Dispute

Clearly, the struggle around crypto banking will not end with licensing. On one hand, state-level regulation still has gray areas. Agencies like NYDFS have long dominated crypto regulation. The expansion of federal authority may trigger new jurisdictional disputes.

On the other hand, although the “Genius Act” has taken effect, many details remain to be clarified by regulators—capital adequacy, risk isolation, cybersecurity standards, and more will become focal points in upcoming policies. The real game will unfold within these technical details.

Additionally, market dynamics must be closely watched. After obtaining banking status, crypto companies can become technology partners for traditional financial institutions or even targets for acquisition. Banks might acquire crypto firms to enhance technological capabilities, or the entire financial landscape could be reshaped.

One thing is clear: OCC’s approval is not the end of controversy but a new beginning. Crypto finance has integrated into the system, but how to balance innovation, stability, and competition will be the core challenge for US financial regulation in the coming years.