According to Reuters, Circle, the issuer of the world’s second-largest stablecoin USDC, is applying for a national trust bank charter from the U.S. Office of the Comptroller of the Currency. "Circle has long sought to seek the highest standards of trust, transparency, governance, compliance", CEO Jeremy Allaire said. "Becoming a publicly traded company is a significant part of that, becoming a national trust company is again a continuation of that". Researchers at ANBOUND believe that this move is driven not only by regulatory considerations but also by a desire to reduce costs and improve efficiency. Furthermore, if the "stablecoin bank" becomes an industry trend, the entire financial system could face an unprecedented structural impact.
Firstly, regulatory compliance is undoubtedly the direct factor behind Circle’s application for a banking license. As the company’s Chief Strategy Officer, Dante Disparte, emphasized that applying for a banking license is important, as the U.S. dollar is a product that the United States exports to the world, hence gaining federal oversight of stablecoin payment activities and trust operations not only establishes certainty in the U.S. market but also at the international level, creating both opportunities and a vital platform for regulatory coordination. This is not just rhetoric. Over the past few years, Circle has consistently sought legal and regulatory recognition around the globe. It has already obtained a Major Payment Institution license in Singapore and operational approval under the EU’s Markets in Crypto-Assets Regulation (MiCA) regulatory framework. With a U.S. banking license, Circle would come under stricter supervision, allowing it to attract more users and capital through enhanced security, thereby laying a solid foundation for future expansion.
Secondly, this move is also driven by Circle’s need to ease cost pressures. Currently, Circle’s main source of income comes from investing the massive reserve assets generated from the issuance of USDC into short-term U.S. Treasury bonds and money market instruments to earn stable returns. According to disclosures, Circle holds over USD 60 billion in reserves, the vast majority of which is custodied by BNY Mellon and managed by BlackRock. This setup means Circle has to pay substantial management fees to these financial institutions. According to BlackRock’s documents, the Circle Reserve Fund it manages is worth USD 53.2 billion, with a management fee of 0.17%. Roughly calculated, that alone amounts to nearly USD 100 million annually, and this does not include fees charged by BNY Mellon. For a company with annual revenue just over USD 1.6 billion and net profits around USD 150 million, this is undoubtedly a heavy burden. Jeremy Allaire has explicitly stated that once licensed, the new bank would be used to directly manage Circle’s reserves. This would allow the company to significantly reduce costs and improve efficiency, enabling it to redirect more resources into products, technology, and global expansion.
It is worth noting that Circle’s move could have a significant demonstration effect on the entire industry. In the current stablecoin market, its largest competitor, Tether, has yet to apply for a U.S. banking license. However, if Circle gains a clear advantage through this banking pathway, other stablecoin issuers will inevitably adopt similar strategies. This trend of "stablecoin banks" could very well become a major industry shift.
It is foreseeable that if stablecoin issuers begin applying for banking licenses on a large scale and effectively become “stablecoin banks”, their capabilities will far exceed what they currently possess. These “stablecoin banks” would be able to independently custody customer assets without relying on traditional banks and could dramatically improve the efficiency of cross-border payments. In the future, they might even gain direct access to the Federal Reserve’s clearing system. In fact, Circle has already launched the Circle Payments Network (CPN), which aims to connect banks, neo-banks, payment service providers (PSPs), and virtual asset service providers (VASPs), enabling 24/7 real-time cross-border settlements in a business-to-business (B2B) context. All of this could effectively bypass the existing banking system, introducing greater instability into the financial system.
A deeper concern is that this trend could pose substantial risks to monetary policy and financial stability. If large-scale capital flows into “stablecoin banks”, the overall money supply in the financial system could become severely constrained. This is because current regulations require stablecoin issuers to hold reserves on a 1:1 basis and prohibit them from issuing loans, resulting in an extremely low money multiplier for these types of "banks".
In theory, the Fed would need to lower interest rates or implement quantitative easing to fill this credit gap. However, there is a fundamental conflict: Circle’s business model heavily relies on a high-interest-rate environment and its reserve assets generate significantly more income when interest rates are elevated. The high-rate environment in 2022 and 2023 directly fueled rapid revenue and profit growth. If interest rates were to drop sharply, “stablecoin banks” would face serious negative impacts, potentially incurring substantial losses that could threaten their operational sustainability. This misalignment of interests puts the Fed in a policy dilemma. It can neither raise rates freely nor lower them easily. Monetary policy will increasingly feel like walking a tightrope. As a result, the vision of using stablecoins to help address the U.S. debt problem becomes even more elusive.
At the same time, as stablecoin issuers become banks, the level of regulation they face will rise to an entirely new level. Under the banking license framework, Circle would be subject to a range of federal regulatory requirements, including capital adequacy standards, Know Your Customer (KYC) protocols, anti-money laundering (AML) checks, stress testing, and cybersecurity oversight, all of which are grounded in the principles of traditional financial safety and stability. Within this regulatory framework, the "decentralized" nature of stablecoins would be significantly diluted. They would no longer be "decentralized cryptocurrencies" but rather “Internet + digital dollars” controlled by a single entity and heavily regulated by the federal government. In this context, the original advantages of cryptocurrencies could become liabilities of the new system like centralization, dependence on a single organization, and vulnerability to digital attacks.
Overall, Circle’s application for a banking license is not only a major strategic decision at the corporate level but could also mark a pivotal moment in the evolution of the stablecoin industry. Under such a scenario, “stablecoin banks” may emerge as a broader trend though it is also likely to bring structural shocks to the existing financial system and monetary policy framework.
Final analysis conclusion:
Stablecoin issuer Circle’s application for a banking license, though driven by its own pursuit of regulatory compliance and cost-efficiency, may signal a systemic transformation in the structure and regulatory boundaries of the entire stablecoin industry. While this shift could enhance efficiency and security, it also holds the potential to reshape the global landscape of monetary policy and the financial system in the future. The step Circle has taken may well be a milestone in a new era, or it could be the starting point of a chain reaction yet to unfold.
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Peng Maosheng is a researcher at ANBOUND, an independent think tank.
