In brief
- The ICBA says Sony Bank’s charter would let it issue deposit-like stablecoins outside traditional banking rules.
- The group’s concerns over Connectia Trust are “overstated and driven by big-bank interests,” an expert told Decrypt.
- Crypto firms, including Coinbase, Circle, and Ripple, are pursuing similar charters.
The Independent Community Bankers of America (ICBA), a national trade association representing small banks, has asked regulators to block Sony Bank’s bid for a national trust charter to issue stablecoins.
In a letter sent last week to the Office of the Comptroller of the Currency, the group warned the Japanese financial giant is exploiting regulatory loopholes to bypass traditional banking oversight.
The ICBA called Sony Bank’s application for its proposed subsidiary, Connectia Trust, “an impermissible reinterpretation” of federal law that “could foreseeably lead to consumer confusion and consumer harm in the event of insolvency.”
Sony Bank filed in October to establish Connectia, which would issue dollar-pegged stablecoins, maintain reserve assets, and provide digital asset custody services.
Crypto firms seek federal charters
The application joins a growing list that includes Coinbase, Crypto.com, Circle, Ripple, Bridge (Stripe’s stablecoin arm), and Paxos, all seeking federal charters as the stablecoin market surges past $311 billion following the passage of the GENIUS Act in July.
The ICBA says Connectia’s stablecoin “shares many features with bank deposits,” electronic transfers, point-of-sale spending, and one-to-one dollar redemption, yet would avoid federal deposit insurance and Community Reinvestment Act requirements that apply to traditional banks.
“This approach appears designed by Sony Bank to receive the benefits of a U.S. bank charter without becoming subject to the full scope of U.S. bank regulations,” Mickey Marshall, the ICBA’s vice president and regulatory counsel, wrote.
The letter questions whether Connectia qualifies for Bank Holding Company Act exemptions limited to institutions that operate “solely in a trust or fiduciary capacity,” noting that trust banks lose that status if they allow deposits withdrawable “by check or similar means for payment to third parties.”
Connectia’s plan to engage in the “business of banking and activities incidental to the business of banking permissible for a national bank” appears to lay “the groundwork for issuing debit cards” that would violate statutory restrictions, the association noted.
The group also questioned Sony Group Corporation’s roughly 20% stake in Sony Financial Group, Connectia’s parent, saying it “warrants further investigation of whether a controlling influence exists” that would trigger bank holding company regulation.
The ICBA also cautioned that the OCC hasn’t resolved an uninsured national bank since 1933 and lacks the expertise to manage a complex crypto collapse, warning that “a single failure in key reassembly or system migration could result in permanent loss of access to billions in customer assets.”
Innovation over “protectionism”
The opposition comes amid similar objections the group filed against Coinbase’s trust charter application earlier this month, prompting Coinbase Chief Legal Officer Paul Grewal to accuse lobbyists of “trying to dig regulatory moats” rather than protect consumers.
Kadan Stadelmann, Chief Technology Officer at Komodo Platform, told Decrypt the banking lobby’s concerns over Connectia are “overstated and driven by big-bank interests.”
“The risks to consumers of stablecoins are being exaggerated in the name of protectionism by big banks of their dominance in western finance,” Stadelmann said. “Stablecoins decentralize money, and help decrease reliance on incumbent banks.”
Regulators should foster innovation while “enforcing sensible rules like the GENIUS Act,” he said, arguing that stablecoins serve “unbanked populations” and can “minimize bank-run risks” through on-chain transparency.
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