Circle Seeks U.S. National Trust Bank License for USDC

Circle, the issuer of the stablecoin USDC, has submitted an application to the Office of the Comptroller of the Currency (OCC) for a U.S. national trust bank license. This move is aimed at enhancing the regulatory standing of their USD Coin (USDC) product and aligning with emerging financial regulations. The proposed bank, to be named First National Digital Currency Bank, N.A., would be the second operating crypto company with such a charter, following Anchorage Digital Bank, which received conditional approval in 2021.

Circle's application seeks to bring the company under direct federal oversight, aligning it with traditional financial institutions and providing a framework for regulatory harmonization. Dante Disparte, Circle's chief strategy officer and head of global policy and operations, emphasized the importance of federal oversight in building market certainty, both domestically and internationally. The application is part of a broader trend of fintech companies seeking U.S. banking charters. The OCC's licensing manual outlines a 30-day comment period followed by a decision within 120 days of receiving a complete application.

If approved, the new bank would offer digital asset custody services to institutional customers, further strengthening Circle's infrastructure for its USDC stablecoin. The stablecoin USDC, the second-largest by market value, is backed by over $60 billion in reserves, consisting of cash and short-dated U.S. Treasuries. As of the end of March, approximately 90% of these assets were held in the Circle Reserve Fund, a dedicated money market fund managed by Blackrock Inc. The assets are custodied by the Bank of New York Mellon.

Circle's pursuit of a national trust bank charter is a strategic move to enhance its regulatory compliance and operational capabilities. The charter would introduce federal supervision, complementing the company's existing state-level money transmitter licenses. This step is particularly significant as it aligns with Circle's global strategy of obtaining licenses and authorizations in various markets. In 2015, Circle acquired the first-ever BitLicense from the New York State Department of Financial Services, demonstrating its commitment to regulatory adherence.

The establishment of a national trust bank would enable Circle to directly manage its USDC reserves and offer custody services for tokenized stocks and bonds on-chain. This development is expected to integrate stablecoins more deeply into the traditional financial system, providing a more robust framework for digital asset management and regulatory compliance. The application, if approved, may strengthen USDC’s market confidence and widen its adoption amid tighter regulatory scrutiny. Circle attempts to position itself as a reliable partner for institutional stakeholders in the financial system.

Financial implications include increased confidence in USDC’s regulatory and infrastructure robustness, potentially impacting liquidity and market behavior. The approval would give Circle a competitive advantage in attracting institutional partners globally. Circle’s strategic positioning aims at leveraging U.S. regulatory norms for enhanced adoption. It showcases Circle’s response to evolving financial landscapes. Approval may set a precedent for digital finance operations in the U.S. Potential outcomes include regulatory clarity for stablecoin operations and reinforcing trust in digital payments. Historical trends indicate such moves could stabilize and expand USDC use across financial systems, matching increased institutional demands.