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Ripple Labs’ latest move to create a national trust bank has drawn sharp criticism from traditional banks and regulators. The blockchain-based payments company wants to start“Ripple National Trust Bank” (RNTB), which would manage reserves for its new RLUSD stablecoin. However, a major U.S. banking group says this move could weaken financial rules and put the banking system at risk.
Community Banks Push Back
The Independent Community Bankers of America (ICBA), a group that represents nearly 5,000 small banks across the U.S., sent a formal letter to the Office of the Comptroller of the Currency (OCC) on August 4. In the letter, they strongly objected to Ripple’s request to open a national trust bank.
ICBA argued that Ripple’s plan goes beyond the normal duties of a trust bank. Instead of just holding assets or managing estates — what trust banks usually do — Ripple wants its trust bank to handle money like a regular bank, including offering payments and redemptions in dollars through its stablecoin RLUSD.
The ICBA warned:
“This has the potential to drain deposits out of the banking system.”
They say that if Ripple is allowed to do this, it would be acting like a normal deposit-taking bank — but without going through the full licensing and regulatory process that traditional banks must follow.
Why This Matters
Ripple’s RLUSD stablecoin would let people store and transfer U.S. dollar value on the blockchain. But the ICBA says that doing so through a trust bank structure goes against the law’s original purpose. They believe Ripple is trying to get the benefits of being a bank without the responsibilities that come with it.
In their letter, the ICBA wrote:
“The OCC should not allow stablecoin issuers to use the national trust bank charter to benefit from full-service bank powers without full-service bank requirements.”
They are especially concerned that stablecoins like RLUSD behave a lot like regular bank deposits, since people can use them to make purchases or transfer money — just like with cash in a checking account.
Regulatory Shortcuts?
The ICBA also accused the OCC of not following proper procedures when allowing trust banks to move into this kind of work. According to them, any major changes in what trust banks are allowed to do should go through formal rulemaking, which includes public comment and review under the Administrative Procedure Act. That process wasn’t followed here, they claim.
Ripple’s Past Legal Issues Raise More Concerns
The ICBA’s concerns don’t stop with rules and definitions. They also pointed to Ripple’s past run-ins with the law as another reason to block the trust bank plan.
They noted Ripple’s history of legal trouble, including:
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A settlement over anti-money laundering violations
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A $125 million fine related to securities law breaches
Given these past issues, the ICBA argued that Ripple isn’t a good candidate to run a regulated financial institution — especially one involved with custody and movement of digital assets.
They warned that crypto assets still face serious risks, including:
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Fraud
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Cybercrime
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Money laundering
Allowing Ripple to operate a trust bank, the ICBA said, would put consumers and the entire banking system at risk.
A Bigger Debate: Innovation vs. Regulation
Supporters of Ripple’s plan — mostly from within the crypto and blockchain industry — argue that new kinds of banks can help modernize the financial system. They say stablecoins like RLUSD offer faster, cheaper, and more open alternatives to traditional money.
However, the ICBA believes that innovation should not come at the cost of safety. They insist that any company offering banking-like services must follow the same tough rules that apply to traditional banks.
They concluded:
“Granting RNTB’s national trust bank charter would undermine the stability of the financial system.”
What Happens Next?
The OCC will now review the ICBA’s letter and Ripple’s application. While no final decision has been made, the case is likely to spark more debate about the role of crypto companies in the banking sector.
At the heart of the issue is a big question: Should crypto firms be allowed to act like banks without being regulated like them?
Ripple says its plans will bring more efficiency to finance. But ICBA and others worry those plans could weaken financial protections and blur the lines between banks and tech companies — a risky move with big implications for consumers and the economy.
