AsianFin -- Circle Internet Financial is seeking a U.S. national bank charter in a bid to bring its dollar-pegged stablecoin fully under federal oversight, a move that could reshape the regulatory landscape for crypto finance and increase pressure on rivals like Tether.
The Boston-based firm behind USDC said on July 1 that it has formally applied to the Office of the Comptroller of the Currency to establish a federally regulated institution called First National Digital Currency Bank, N.A. The new bank would hold USDC reserves and offer digital asset custody services to institutional clients.
Circle CEO Jeremy Allaire said the application marks a proactive effort to align with anticipated U.S. legislation governing payment stablecoins. “By applying for a national trust bank charter, Circle is taking steps to further strengthen the infrastructure supporting USDC,” Allaire said in a statement.
The announcement comes as stablecoin issuers face intensifying scrutiny from U.S. regulators. The Securities and Exchange Commission is reportedly investigating market leader Tether, while policy proposals around stablecoin reserve disclosures and custody continue to evolve.
Securing a banking license would allow Circle to hold and manage USDC reserves directly, reducing reliance on commercial banks. That dependency came under stress in March 2023, when the collapse of Silicon Valley Bank briefly caused USDC to depeg from the dollar, triggering investor panic and highlighting vulnerabilities in stablecoin infrastructure.
A banking license could help Circle avoid similar shocks in the future by eliminating third-party custodians and enhancing transparency. Siemens, a Circle competitor in digital asset services, has also moved toward more regulated frameworks.
“Once approved by the OCC, Circle’s reserve transparency and credibility will significantly improve, encouraging broader institutional adoption,” said Zhang Xuefeng, a financial commentator based in Beijing. “It also opens the door for Circle to offer services beyond stablecoin issuance—such as lending, settlements, and clearing—allowing the company to diversify its revenue streams.”
However, Zhang warned that the move will come at a cost. Circle will need to meet capital adequacy, liquidity, and compliance requirements similar to those imposed on traditional banks—pressuring margins and forcing a rethinking of its operating model.
“There’s also a risk of creating a single point of failure if USDC reserves are entirely self-custodied,” Zhang said.
If approved, Circle’s application could accelerate a shift in the digital asset industry toward full-stack, vertically integrated “crypto-native banks.” Paxos and Gemini, both regulated stablecoin issuers, may follow suit.
The move mirrors broader global fintech trends. In 2019, Hong Kong’s monetary authority granted eight virtual banking licenses to firms including Tencent, Ant Group, and JD.com. These digital-first banks focused on consumer finance and cross-border retail banking, using technology to expand access and efficiency.
While Circle’s ambitions differ—it operates at the intersection of blockchain infrastructure and capital markets—its effort reflects a convergence between crypto and traditional finance.
Still, Circle faces a challenging road ahead. The U.S. regulatory framework for stablecoins remains unsettled. The company must convince the OCC and the Federal Reserve that it can operate as a federally chartered institution without introducing systemic risk.
Some industry observers have raised concerns about moral hazard, noting that Circle would simultaneously issue and custody its reserves. “This dual role is precisely what regulators are trying to avoid,” said one policy expert briefed on the matter. “It will be a key test case for how systemic risk is addressed in the next phase of digital banking.”
Should Circle succeed, it could pressure regulators worldwide to adapt. The EU, Singapore, and other jurisdictions may revise rules to support similar models, potentially setting off a new wave of competition among cross-border digital currency banks. Approval could also force the U.S. Federal Reserve to accelerate development of a central bank digital currency (CBDC) to protect monetary sovereignty.
“This is about much more than a bank charter,” said Zhang. “It’s about defining the future architecture of digital money.”
