Community bankers sued the Trump administration on Friday after regulators moved to grant bank charters to a wave of cryptocurrency companies, the latest chapter in a fight between traditional banking and crypto.

The lawsuit by the Independent Community Bankers of America accuses the regulators of allowing "highly risky cryptocurrency and digital asset activities" to enter the banking system without submitting them to the same level of regulatory oversight as banks.

The lawsuit names the Office of the Comptroller of the Currency and its head, Jonathan Gould. The OCC is responsible for chartering national banks and ensuring they remain financially stable.

A spokeswoman for the agency, part of the Treasury Department, declined to comment on the litigation.

The details

Under Gould, the OCC has granted preliminary approval to slew of national trust charter applications by crypto companies that say they want to use the licenses to custody digital assets and issue stablecoins, a type of crypto designed to maintain a fixed value.

Trust banks traditionally don't take deposits or make loans, meaning they aren't subject to the same oversight or financial stability rules as other banks. They often engage in the safekeeping of various assets, or fiduciary services. In the past, trust charters have been used by businesses such as insurance companies and payroll processors.

The ICBA in its lawsuit argues that the OCC has overstepped its statutory authority by expanding the types of activities that trust banks can engage in.

The OCC's actions "place community banks at a severe competitive disadvantage by allowing the national trust banks to offer many of the same services as community banks without complying with the same costly banking laws and regulations," the ICBA said in its lawsuit.

The lawsuit asks a federal court in Washington, D.C. to vacate a rule that the regulator finalized earlier this year and guidance that the group said opened the door to the flood of applications for charters.

"Congress did not create the national trust charter as a side door into the banking system for crypto firms seeking the credibility of a federal bank charter," ICBA President and CEO Rebeca Romero Rainey said in a statement.

The context

Under President Trump, a Republican majority in Congress and the nation's financial regulators have moved to usher digital assets into the mainstream financial system.

Gould has argued the financial industry needs to embrace innovation to stay relevant. He has pointed to a precipitous decline in the number of applications for bank charters since the 2008-09 financial crisis.

Banks have in some cases have opposed the changes. Smaller banks have been on edge that cryptocurrencies and stablecoins will draw deposits out of the banking system, which could reduce profits and their ability to lend.

A bill that would have created a regulatory framework for crypto and allowed banks to engage more directly with crypto companies collapsed in the Senate last month after an intense campaign by banks over certain provisions in the bill.