Stablecoin issuer Circle has received the Office of the Comptroller of the Currency’s unfettered approval for a national trust bank license, the company announced Friday.
Circle National Trust, as the banking entity will be called, will offer fiduciary digital asset custody services and plans to provide reserve management later.
Circle CEO Jeremy Allaire said Friday’s development “marks a defining step in bringing blockchain technology and digital assets into the core of the U.S. financial system.”
“Federal oversight of our trust bank sets a new standard for transparency, governance and scale for Circle’s infrastructure and unlocks a new phase of adoption, where leading financial institutions can build on public blockchains with clarity and confidence,” Allaire said.
Circle was one of five firms, along with Ripple, Paxos, BitGo and Fidelity, whose national trust bank charter applications were conditionally approved in December by the OCC. BitGo received its unconditional charter shortly thereafter. The three other companies have yet to gain the full go-ahead that Circle and BitGo have.
It wouldn’t be the first time Circle has taken a turn as a market leader: The company gained the first-ever BitLicense from the New York Department of Financial Services in 2015.
Circle’s initial clients for digital asset custody will comprise a “limited number of institutional customers directly, focusing on banks and other financial institutions, such as regulated derivatives organizations,” the company said Friday.
Under OCC supervision, Circle’s trust bank will advance its stablecoin USDC’s “role as trusted, federally regulated digital dollar infrastructure for payments, settlement, and capital markets activity, supporting the role of the U.S. dollar in an increasingly digital global economy,” the company said.
News of the approval propelled Circle’s share price upward 15.6% before it leveled off toward an adjusted close, up 5.7%, according to Yahoo Finance.
Mizuho Securities analyst Dan Dolev called the market reaction “likely overly optimistic,” in a note seen by Banking Dive.
It “does not resolve fundamental issues that have been hurting the stock of recent,” Dolev said, citing USDC’s falling market value and the entry of competitor Open USD into the market.
National trust bank charters have seen a spike in interest under OCC chief Jonathan Gould.
Ahead of the conditional approvals in December, some trust charter applications generated backlash from banking trade groups such as the Bank Policy Institute and Independent Community Bankers of America, as well as the nonprofit National Community Reinvestment Coalition.
Granting trust charters to stablecoin issuers would blur the statutory boundaries of what constitutes a bank, the NCRC said at the time.
For one, a trust would not be forced to comply with the Community Reinvestment Act, as banks are, the NCRC said.
For another, a trust wouldn’t be forced to hold deposit insurance, the ICBA said, creating the risk of consumer “confusion” and “harm” if the trust becomes insolvent.
That hasn’t stopped applications and approvals from proliferating. Most recently, Japanese conglomerate Sony received the OCC’s conditional approval for a trust bank charter.
Circle has a market value of $73.2 billion, according to CoinGecko.
