OCC Clarifies Preemption of State Money Transmitter Laws Under National Bank Act

Last month, the Office of the Comptroller of the Currency (OCC) published (the “Letter”), clarifying that state money transmitter licensing (MTL) laws are preempted by the National Bank Act as to national trust banks (NTBs) because such laws “prevent or significantly interfere with” an NTB’s exercise of its federally authorized powers. The Letter significantly broadens the OCC’s previous position on preemption of state MTLs and is a welcome development for NTBs offering payment services.

The Letter arose from a request by Fidelity Digital Assets Service, LLC (FDAS), which was recently approved by the OCC to convert from a New York-chartered limited liability trust company to an uninsured NTB offering cryptocurrency custody, trade execution, and related services. FDAS, which maintained MTLs in several states, informed the Iowa Division of Banking (DOB) that it wished to surrender its Iowa MTL. 

In response, the DOB noted that Iowa law exempts banks and trust companies from the state’s MTL requirements only if the bank or trust company maintains federal deposit insurance, and requested that FDAS provide the legal basis for surrendering its license. FDAS responded that the National Bank Act preempts Iowa’s MTL requirement and separately requested that the OCC confirm this conclusion. The OCC sided with FDAS, confirming the broad reach of preemption under the National Bank Act in this context. 

While the Letter is based on the facts and circumstances presented to the OCC and is binding on the OCC only as to FDAS, such interpretations strongly indicate an agency’s position on an issue and can generally be relied upon by others. Furthermore, the Letter is not limited to Iowa law, and instead the OCC indicates that the same analysis would apply to any similar state MTLs that would purport to apply to FDAS.

Prior to the Letter, the scope of preemption for NTBs was unclear. Although a established that national banks are exempt from state money transmitter laws for purposes of “fiduciary activities,” that letter implies that preemption is limited to such activities. Furthermore, while banks and other depository institutions are exempt from most if not all MTL requirements, these state law exemptions are generally limited to federally insured institutions. Because NTBs generally do not maintain federal deposit insurance, prior to the Letter it was unclear whether NTBs lacking such insurance were subject to MTL requirements.

The Letter is part of a broader recent shift in OCC policy regarding the scope of permissible activities for NTBs, especially with respect to cryptocurrency. During the second Trump Administration, the OCC has made clear that national banks and NTBs may engage in a wide variety of cryptocurrency-related activities, including , , and . 

Furthermore, earlier this year, the OCC amended its charter application regulations to clarify the permissible activities that an NTB may engage in. Specifically, the updated regulations indicate that the scope of permissible activities for NTBs is not limited only to “fiduciary activities,” but instead that an NTB may engage in “the operations of a trust company and activities related thereto.” Since that time, the OCC has granted conditional approval of several NTB applications (including both de novo charter applications and state charter conversions), with the resulting NTBs conditionally approved to engage in a wide variety of cryptocurrency activities.  

While these developments could potentially be rolled back by a future OCC, together they make clear that the current leadership at the agency believes not only that NTBs may engage in a broader scope of activities than they traditionally have, but that they may do so without complying with state MTL requirements. However, states may still take the position that NTBs must maintain state MTLs, and a court reviewing such a dispute would not be required to defer to the OCC’s position under the United States Supreme Court’s decision in Loper Bright. 

If you have questions, please contact any of the authors or the Manatt professional with whom you work.