ABA Fights Back: Why Traditional Banks Are Terrified of Ripple’s Charter Move
Ripple's push for a federal charter just hit a wall—of suits. The American Bankers Association (ABA) is lobbying hard to block the crypto giant's bid, claiming it threatens 'financial stability.' Translation: they're scared of losing control.
Behind the scenes: Legacy banks see Ripple's potential charter as an existential threat. A regulated crypto-native institution could bypass their outdated plumbing—and their fees.
The irony? These are the same institutions that still settle transactions slower than a 19th-century telegram. Maybe innovation hurts more when you've been overcharging for mediocrity.
Ripple Banking License Rejection Sparks Federal Charter Debate
Several major banking and credit union trade associations have formally requested that federal regulators pause their review of national bank charter applications that crypto firms including Ripple and Circle submitted. This Ripple banking license rejection effort was actually coordinated through a joint letter that they sent to the Office of the Comptroller of the Currency (OCC).
Alexander Grieve, head of government affairs at crypto investment firm Paradigm, had this to say:
Banking Industry Concerns Mount
The American Bankers Association argues that crypto companies lack the transparency that regulators need for proper analysis of their business models. Traditional banks are worrying that Ripple vs banks competition could actually create unequal regulatory standards, and this WOULD allow crypto firms to operate with reduced compliance burdens compared to established financial institutions.
Ripple regulatory hurdles continue mounting as banking groups are questioning whether crypto custody services actually satisfy fiduciary requirements for national trust bank charters. Federal regulators have traditionally reserved the Federal Banking Charter designation for institutions that engage in specific fiduciary services.
Custodia Bank founder Caitlin Long responded to the pushback, and she suggested that regulatory imbalances exist. She noted that if national trust charters offer lighter oversight, traditional banks might actually consider switching to those models to reduce compliance costs.
The banking coalition is warning that approving Ripple’s Federal Banking Charter application without full public consultation could weaken financial safeguards and introduce new systemic risks.
The state of Ripple vs banks can also be presented as a manifestation of wider fears regarding disruption of already established financial oversight systems, through cryptocurrency integration. According to the American Bankers Association, current regulatory frameworks that date as far back as the 1980s are unable to cope with a distinctive crypto-related business model.
The OCC’s decision on Ripple regulatory hurdles will establish important precedents for digital asset companies that are pursuing federal banking licenses. This Ripple banking license rejection campaign actually highlights fundamental disagreements about appropriate oversight for cryptocurrency operations within traditional banking systems.
