Circle Seeks National Trust Bank Charter for USDC Compliance

Circle, a prominent player in the digital currency space, has taken a significant step towards enhancing its regulatory compliance and service offerings. The company has applied to charter First National Digital Currency Bank, aiming to become a federally regulated trust. This move would enable Circle to manage the reserves backing its stablecoin, USDC, and expand its custody services for institutional clients.

In a June 30 announcement, Circle submitted an application to the Office of the Comptroller of the Currency (OCC), seeking authorization to operate as a national trust bank under full OCC supervision. If approved, the new entity would be responsible for holding and safeguarding the assets that back USDC for Circle’s US issuer. Additionally, it would offer crypto custody services to a range of institutional clients, including pension funds, asset managers, and corporate treasurers.

Circle's CEO, Jeremy Allaire, highlighted the strategic importance of this charter, stating that it marks a significant milestone in the company's goal to build an internet financial system that is transparent, efficient, and accessible. Allaire emphasized that Circle aims to enhance the reach and resilience of the US dollar by operating market-neutral infrastructure open to global institutions.

This application aligns with the GENIUS Act, a bill currently under consideration in Congress. The act proposes that payment stablecoin issuers must hold segregated reserves in federally regulated institutions. By seeking a national charter, Circle is positioning itself to comply with potential future regulations while reducing counterparty risk for large depositors.

Circle's licensing strategy has been proactive, with the company securing the first New York Department of Financial Services BitLicense in 2015. This early compliance gave Circle a head start in adhering to the European Union’s Markets in Crypto-Assets framework. In April, Circle received in-principle approval from the Abu Dhabi Global Market to operate as a money services provider, further expanding its global reach.

The trust bank, which will operate as a wholly owned subsidiary of Circle Internet Group, will adhere to OCC rules regarding capital and liquidity. It will also undergo regular examinations to ensure compliance. Circle has not provided a specific launch timeline, but OCC evaluations of trust charter applications typically take several quarters.

Institutional clients have been increasingly pressing stablecoin issuers for federally regulated custody options as lawmakers debate reserve mandates and disclosure standards. By holding reserves at a national trust, Circle aims to streamline compliance and provide a more secure environment for large depositors.