- Ripple Labs has applied to the OCC for a national trust bank charter, which could help it federally regulate its RLUSD stablecoin if new U.S. laws pass.
- The RLUSD stablecoin is currently managed by Standard Custody & Trust, a New York regulated trust bank.
- Gaining a Federal Reserve master account would allow direct payments and central bank reserve holdings for RLUSD but faces regulatory hurdles.
- Rules around crypto and “intangible assets” complicate Ripple Labs’ path to becoming a bank due to large XRP holdings.
- Routing the charter through a subsidiary like Standard Custody could offer a workaround to regulatory challenges and capital requirements.
Ripple Labs has submitted an application to the Office of the Comptroller of the Currency (OCC) for a national trust bank charter. The move relates to upcoming potential legislation in the U.S. known as the GENIUS Act, which could require stablecoins like RLUSD to be federally regulated if their circulation exceeds $10 billion.
Currently, Ripple Labs’ RLUSD stablecoin is issued by Standard Custody & Trust, a trust bank regulated in New York. If the OCC grants Ripple’s charter request, the company could place RLUSD under federal oversight. On X (formerly Twitter), Ripple CEO Brad Garlinghouse stated, “if approved, we would have both state (via NYDFS) and federal oversight, a new (and unique!) benchmark for trust in the stablecoin market.”
Securing a Federal Reserve master account brings key benefits. It would let the bank process payments directly without middlemen and potentially allow stablecoin reserves to be held at the Federal Reserve. However, policy questions remain since the current administration prefers stablecoin reserves to sit in U.S. Treasuries rather than at the central bank.
The Federal Reserve uses a tiered system for processing master account applications. Federally regulated banks are Tier 1, facing the easiest process. OCC-supervised banks fall under Tier 2, facing more scrutiny. State-regulated institutions are Tier 3, which makes approval more difficult. This explains why Ripple Labs is pursuing both a national and state charter.
There is a challenge linked to Ripple Labs’ large holdings of XRP cryptocurrency. Under Basel III international banking rules, banks that hold digital assets like XRP must set aside an equal amount of capital as a cushion—for example, $100 million in capital for $100 million in crypto. In addition, banking rules do not allow “intangible assets” such as cryptocurrencies or goodwill (the extra amount paid in acquisitions) to count toward required capital.
As a result, if Ripple Labs deducts all required intangible assets from its capital, the company may not have enough to qualify for a bank charter. One potential solution would be to shift the charter application from Ripple Labs itself to a subsidiary such as Standard Custody. This approach would keep parent company assets separate and mirror the structure used by Anchorage Digital, which currently holds a national trust charter through a related entity.
Right now, Ripple Labs plans to continue operating its RLUSD stablecoin via Standard Custody while pursuing the federal charter as a longer-term option. The GENIUS Act’s requirements only apply once a stablecoin tops $10 billion in circulation, but Ripple’s application prepares it for possible changes ahead. If a federal charter is approved, the company could voluntarily opt for stricter oversight before reaching that size.
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