Circle Applies to Establish First National Digital Currency Bank

Stablecoin issuer Circle says it has applied to the Office of the Comptroller of the Currency (OCC) to establish a national trust bank, First National Digital Currency Bank. This move follows Circle’s listing on the New York Stock Exchange last month at $31. Since then, the price almost touched $300, and is currently $181. While Circle’s USDC token is regarded as high quality, its current legal structure is not optimal for stablecoin user risk. With BlackRock managing the majority of its reserves, it is not incorporated as a trust.

That contrasts with fellow regulated issuers that are state chartered trusts such as Paxos, Gemini, and the Ripple subsidiary that issues its stablecoins.  Without a trust structure, there would be legal uncertainty in the unlikely event of a token collapse. That’s the sort of thing that will hold back institutional adoption, one of Circle’s aims. With a trust subsidiary, Circle could manage the reserves more directly.

“By applying for a national trust charter, Circle is taking proactive steps to further strengthen our USDC infrastructure,” said Circle Co-Founder, Chairman and CEO Jeremy Allaire, adding that it would “support the development of crucial, market neutral infrastructure for the world’s leading institutions to build on.”

Becoming a bank opens up another possibility: potentially holding cash reserves at the Federal Reserve, if it applies for and is granted a master account. Given USDC suffered a de-peg event following the collapse of Silicon Valley Bank (SVB), this is something that Circle particularly values. Even before the SVB failure, Circle was exploring a reverse repo capability offered to money market funds by the Federal Reserve, which would effectively be parking money at the central bank. However, the Fed tightened the rules, closing off that avenue. Applying for Fed access is by no means a guarantee of success.