The Banking Industry Just Changed: What the OCC's Crypto Charters Mean for Community Banks

On December 12, 2025, the Office of the Comptroller of the Currency quietly reshaped the American financial landscape. Five crypto firms (Circle, Ripple, Paxos, BitGo, and Fidelity Digital Assets) received conditional approval for national trust bank charters.

This wasn't just a regulatory milestone. It was a signal that the wall between traditional banking and digital assets has officially come down.

I've spent over two decades in banking operations and payment processing. This moment demands attention because now the regulatory framework is finally catching up, and with it comes both existential risk and unprecedented opportunity for traditional banks.

What Actually Happened

Comptroller Jonathan Gould's announcement granted two types of approvals. Circle and Ripple received brand-new national trust bank charters, while BitGo, Fidelity Digital Assets, and Paxos were approved to convert their existing state charters to federal ones.

National trust bank charters permit fiduciary activities including custody, but they don't allow traditional deposit-taking or lending. What they do allow is arguably more significant in 2025: regulated digital asset custody, stablecoin issuance, settlement services, and integration with blockchain infrastructure.

Circle, issuer of the $78 billion USDC stablecoin, called the charter "an important milestone" that will "enhance the safety and regulatory oversight of the USDC Reserve." Ripple's CEO Brad Garlinghouse was more direct, calling out traditional banking's resistance: "Your anti-competitive tactics are transparent... here's the crypto industry, directly under the OCC's supervision and standards."

The application pipeline tells the bigger story. From 2011 through 2024, the OCC averaged fewer than four charter applications annually. In 2025 alone? Fourteen applications, with Coinbase, Crypto.com, Stripe's Bridge subsidiary, and others still pending.

The Regulatory Foundation: GENIUS Act

None of this would have happened without the GENIUS Act, signed into law on July 18, 2025. This legislation created the first comprehensive federal framework for payment stablecoins, establishing clear rules that made institutional participation possible.

The Act requires stablecoin issuers to maintain 100% reserves in highly liquid assets: Treasury bills, insured bank deposits, or central bank reserves. It mandates monthly disclosures and audited financial statements for issuers exceeding $50 billion in circulation. It brings stablecoin issuers under Bank Secrecy Act requirements and creates a dual federal-state regulatory framework.

For traditional banks, two provisions matter most:

Bank subsidiaries can issue stablecoins with approval from their parent institution's primary federal regulator
The OCC can approve nonbank entities as federal stablecoin issuers, meaning banks now face regulated competition from entities that don't carry the same capital requirements or regulatory burden

Treasury projections suggest stablecoins could grow to over $6 trillion in volume. Banking groups fear this growth will pull primarily from bank deposits, reducing profitability and lending capacity.

Those fears aren't unfounded, but they miss the larger strategic picture.

Stablecoins vs. Deposit Tokens

While crypto firms were pursuing trust charters, the largest banks in America were building something potentially more significant: deposit tokens.

Stablecoins

A payment stablecoin is typically issued by a nonbank entity and backed by reserves (cash, treasuries, etc.). The token holder has a claim on the issuer's redemption promise, not a direct insured bank deposit.

Deposit Tokens

A deposit token is different: it's a tokenized representation of a bank deposit liability, issued directly by a regulated commercial bank. When you hold a JPMorgan deposit token, you have a direct claim on JPMorgan Chase Bank, N.A., subject to FDIC insurance limits.

This distinction matters enormously. Stablecoins are backed by reserves held separately from the issuer's balance sheet. Deposit tokens are the deposit itself, just in programmable form.

In June 2025, JPMorgan launched JPMD, a blockchain-based deposit token representing institutional U.S. dollar deposits. They can move instantly between ledger-aware counterparties without waiting for batch clearing. They enable 24/7/365 settlement. And critically, they could potentially be interest-bearing and FDIC-insured.

JPMorgan's blockchain platform has processed more than $1.5 trillion in transactions since 2020, with daily volumes exceeding $2 billion. Citi's Token Services platform, launched in September 2023, already converts institutional clients' deposits into digital tokens for instant cross-border payments. HSBC expanded its tokenized deposit service to cross-border transactions in 2025.

According to Citi Institute projections, tokenized bank deposits could support $100-140 trillion in annual transaction flows by 2030. That could rival or surpass stablecoin volumes.

Why This Matters for Community Banks

If you're running a bank under $10B, the question isn't "should we do crypto?"

The question is: Where do our business clients settle value in 2026, and who controls that experience?

When settlement becomes 24/7, near-instant, and programmable, clients will start expecting the same convenience they get everywhere else. The firms that win distribution will capture relationship gravity (treasury workflows are sticky), data, and fee pools around settlement, conversion, risk, and compliance.

A comprehensive study by Charles River Associates examined whether stablecoin adoption threatens community bank deposits. Using monthly data from 2019 to 2025, they found no significant relationship between stablecoin growth and community bank deposit outflows. Even under worst-case assumptions, the impact would be less than 7% under extreme adoption scenarios and under 1% in realistic ones.

The real risk isn't deposit flight to stablecoins. It's relevance.

Payment rails determine who owns the customer relationship, who holds the data, and who captures the economics of settlement. If stablecoin or fintech rails dominate, banks risk disintermediation. If deposit tokens gain traction, banks can reassert their role as the backbone of the financial system.

Consider the revenue opportunities. Tether, a stablecoin issuer, is more profitable than Europe's largest banks due to interest earned on its Treasury reserves. Banks that issue deposit tokens or their own stablecoins can capture similar economics while maintaining regulatory compliance and customer trust.

Strategic Options for Banks

Here's where this gets practical. At Commercial Bank of California, I've been thinking through what options actually make sense for community and regional banks. We don't need a hype-driven "crypto strategy." We need an embedded finance and programmable settlement strategy that protects relationships and expands our product surface area.

Issue Your Own Deposit Token or Stablecoin

The GENIUS Act explicitly permits bank subsidiaries to issue stablecoins. A bank-branded stablecoin or deposit token can serve multiple purposes: facilitating faster payments between customers, enabling 24/7 settlement, supporting programmable finance applications, or providing the basis for new financial products.

Fidelity is already testing its own stablecoin. St. Cloud Financial Credit Union, a Minnesota-based institution with $400 million in assets, announced plans to launch its own stablecoin in September 2025. If they can do it, so can we.

Provide Custody and Conversion Services

Stablecoin conversion services on platforms like Coinbase charge fees ranging from 0.1% to 0.2% for business clients. That's significantly higher than the FX spreads banks typically offer for major currency pairs. Banks that provide stablecoin custody, on/off-ramp services, and conversion can capture new fee income while retaining customer relationships.

Join a Consortium

JPMorgan, Bank of America, Citi, Wells Fargo, Early Warning Services (which operates Zelle), and The Clearing House are reportedly exploring a consortium-backed stablecoin. For community and regional banks, similar consortiums may provide a path to digital asset capabilities without the overhead of going it alone.

Partner with Established Players

Fiserv announced a digital asset platform in partnership with Circle, enabling community financial institutions to process stablecoin transactions through an ecosystem including a stablecoin orchestration layer, digital asset account ledger, and connections to payment rails including PayPal and Mastercard.

For banks running on FIS, they've also launched Atelio as an API-driven embedded finance platform. These partnerships allow smaller institutions to offer digital asset services without building infrastructure from scratch.

Hold Reserves for Stablecoin Issuers

Stablecoin issuers need banking partners for their reserves. The GENIUS Act permits reserves in insured bank deposits. For banks willing to work with crypto firms, reserve custody represents a new source of stable, fee-generating deposits.

A Pragmatic 90-Day Playbook

Here's what I'd recommend for any community bank looking to get started:

Step 1: Choose one use case with real demand. Start with workflows where speed and availability matter: treasury settlement windows (after hours/weekends), cross-border supplier payments, controlled on/off ramp services for business clients, or faster B2B payouts.

Step 2: Use embedded finance rails before inventing new ones. Most core providers already have APIs for account opening and money movement. FIS Banking as a Service and Code Connect are practical foundations. Don't DIY what you can integrate.

Step 3: Pilot controlled stablecoin flows with a partner. FIS has a partnership with Circle for real-time payments integration. This doesn't mean "issue a stablecoin tomorrow." It means you can pilot controlled settlement flows while building capabilities in parallel with compliance and risk.

Step 4: Treat core APIs as a product surface area. If your goal is embedded finance distribution, the capability you're really building is secure access to bank functions via APIs. That's the foundation for everything else.

The Risks Are Real, But Manageable

Digital asset engagement carries legitimate risks:

Cybersecurity: custody and key-management risks are non-negotiable
BSA/AML + sanctions: policies for blockchain-related flows and counterparties need to be explicit
Counterparty risk: not all stablecoins are backed equally, and not all issuers are transparent
Consumer disclosures: what is and isn't insured must be clear

But these risks are manageable with proper due diligence and infrastructure. The OCC's charter approvals and the GENIUS Act's regulatory framework provide the clarity institutions need. The SEC recently rescinded SAB 121 via SAB 122, removing a major capital hurdle around custody accounting treatment.

Comptroller Gould stated explicitly: crypto-related activities that many banks want to participate in are legally permissible and should not be stigmatized.

None of this is a reason to freeze. It's a reason to do it like a bank.

The Window Is Open

We're witnessing the early stages of a fundamental transformation in how money moves. Stablecoins and deposit tokens aren't replacing traditional banking. They're creating new forms of bank money that operate on programmable rails, settle instantly, and work around the clock.

The banks that move early will shape client expectations around access and pricing. They'll gain strategic insight into how corporate clients engage with digital assets. They'll capture new revenue streams and reinforce their role in the financial system.

The banks that wait will find themselves playing catch-up, competing against crypto-native firms with federal charters, fintech platforms with integrated stablecoin services, and forward-thinking competitors who already locked in the key relationships.

Circle, Ripple, Paxos, BitGo, and Fidelity Digital Assets now operate under the same federal oversight as traditional banks. The regulatory playing field is leveling. The question for every bank isn't whether to engage with digital assets. It's how quickly you can build a strategy that captures the opportunity before your competitors do.

The battle over who controls the future of money has begun.

Corey Young is a Senior Vice President of Operations & Direct Merchant Services at Commercial Bank of California and former CEO of Agile Financial Systems. He has over two decades of experience in banking operations, payment processing, and fintech.