Circle Files for National Bank Charter to Custody $60 Billion Reserves

Circle, a prominent player in the cryptocurrency industry, has taken a significant step towards enhancing its operational capabilities by filing a formal request with the Office of the Comptroller of the Currency (OCC) to establish First National Digital Currency Bank, N.A. This move, if approved, would grant Circle the legal authority to directly custody its own $60 billion reserves, eliminating the need for intermediaries. The reserves backing Circle’s USDC, the second-largest stablecoin by market value, comprise cash and short-dated US Treasuries, as indicated in the company’s latest attestation from June 26.

This application marks a pivotal moment for Circle, as it aims to become only the second crypto company to secure a national trust charter, following Anchorage, which received conditional approval in 2021 to operate as Anchorage Digital Bank. The push for a national bank charter comes at a time when Circle is experiencing a surge in stock market performance. Since its IPO earlier this month, the firm’s shares have more than quintupled, rising from its $31 offering price to a peak of $298.99. This rally was fueled by the US Senate’s passage of stablecoin legislation on June 17, which sparked a wave of activity across the industry, with major players like Fiserv and Mastercard announcing further stablecoin initiatives.

Despite the optimism, there are concerns about the sustainability of Circle’s stock rally. Analysts have expressed mixed views on the company’s future prospects. Some analysts have highlighted the potential for strong long-term industry adoption of stablecoins, while others have warned of growing competition and the risk of new players challenging Circle’s market position. The company’s current price-to-earnings ratio of over 120 has drawn comparisons to high-growth stocks like Tesla and AI companies, with analysts divided on whether the stock is overvalued or undervalued.

Circle’s journey towards securing a national bank charter is not without its challenges. The company has a history of navigating US regulations, having obtained a BitLicense from New York in 2015 and holding money transmitter licenses across multiple states. The national charter, if granted, would provide Circle with deeper access to institutional money and reduce its reliance on third-party custodians. However, the market’s reaction to Circle’s stock has been volatile, with significant fluctuations in share price indicating ongoing uncertainty about the company’s future.