US Regulator Returns Zerohash Trust Bank Bid Over Deficiencies
Crypto infrastructure provider Zerohash had its application for a federal trust bank charter returned by US regulators, highlighting the compliance and operational scrutiny facing firms serving major financial institutions.
Zerohash has seen its application for a United States national trust bank charter returned by the Office of the Comptroller of the Currency. The banking regulator sent the filing back on July 17, a move that indicates the application contained material deficiencies rather than facing a formal denial.
The Chicago-based company provides backend crypto infrastructure for major traditional financial firms, including Morgan Stanley’s E*Trade, BlackRock, and Stripe. Zerohash intends to refile its application by the end of the month, adopting a narrower and more sequenced approach to its proposed trust activities.
The setback interrupts the firm's effort to secure a federal charter amid a wave of digital asset approvals. Following recent stablecoin legislation, the comptroller has granted provisional charters to numerous crypto-oriented entities, including Circle, Ripple, Paxos, and Fidelity Digital Assets.
This recent expansion of the federal trust bank roster has generated pushback from traditional banking advocates. The Independent Community Bankers of America formally objected in April, arguing that the sheer volume of recent approvals precludes transparent and deliberate regulatory policymaking.
Beyond the regulatory friction, Zerohash is navigating internal compliance disputes. The company is currently fighting a California lawsuit filed by its former chief compliance officer, Edgar Guerra, who claims he was terminated to conceal operational shortcomings.
Guerra, a former Federal Reserve regulator, alleges his team identified more than 200 compliance gaps within the firm. These reported deficiencies included weaknesses in the company's anti-money laundering controls.
The comptroller’s policy permits the return of applications if a firm fails to provide necessary information regarding its finances or executive officers. It remains unclear whether the regulator was aware of the ongoing litigation or the specific compliance allegations when reviewing the charter bid.
Zerohash maintains that the return is merely an administrative process coordinated with the regulator and does not affect its current operations. The firm already operates under a state trust charter, and its existing institutional partnerships do not strictly depend on federal approval.
Prior to this regulatory hurdle, the infrastructure provider was pursuing further investment at a potential valuation exceeding $1.5 billion. The company also recently engaged in unsuccessful acquisition discussions with Mastercard.
