Stablecoin payment company Rain plans to establish a national trust bank in New York State to manage digital assets and US dollars, as well as to handle stablecoin reserves, issuance, and redemption services for institutional clients.

Rain indicates that an application has been submitted to the Federal Reserve Board of the United States (Office of the Comptroller of the Currency, referred to as OCC), with the hope of obtaining a license to establish a national trust bank. This bank will manage digital assets and US dollars for institutional clients, as well as handle the issuance and redemption of stablecoins.

Rain says that this proposed bank will not accept deposits, issue commercial loans, provide consumer accounts, nor will it be insured by the Federal Deposit Insurance Corporation (FDIC); customer assets will be separated from the bank's own assets.

This application still requires regulatory approval and public consultation. Meanwhile, community banks in the United States are questioning the authority of OCC to grant trust licenses to crypto companies that do not provide traditional banking services.

The proposed New York subsidiary, named Rain National Trust, bank, will provide fiduciary custody for digital assets and US dollars, manage reserves for approved stablecoin issuers, and issue and redeem dollar-backed stablecoins for institutional clients.

This application is part of a broader wave of applications for limited-purpose national trust bank licenses. Circle, Ripple, BitGo, and Fidelity were among the five crypto companies that received preliminary approval from OCC in December last year. Circle has now obtained final approval from OCC at the end of July and can operate its own federal trust bank in New York.

The National Trust Bank is authorized to provide custody and fiduciary services, but it does not accept consumer deposits or issue loans like traditional commercial banks.

This means that they have less reliance on third parties; they do not need to depend on third parties to manage customer assets, oversee stablecoin reserves, or handle issuance and redemption. The proposed trust bank Rain will not accept deposits, issue commercial loans, provide consumer accounts, nor will it offer FDIC insurance.

Rain indicates that the assets held by customers will be separated from the bank's own assets. The proposed stablecoin reserves held by the bank can be lent out, pledged, or reused.

The license path has drawn opposition from traditional American banking sectors. Last week, the Independent Community Bankers of America (ICBA) sued the regulatory authority, claiming that such authorities have no right to grant national trust licenses to crypto companies that do not provide traditional banking services. The ICBA argued that this arrangement allows crypto companies to enjoy bank privileges without assuming the same obligations that lending institutions face.

The application for Rain still requires approval from OCC and must go through a public consultation period.