Blockchain and Crypto, Member Exclusive

‘The banking pendulum is beginning to swing’: Circle plans to become a national digital currency bank

  • Circle will be the first crypto firm to become a full-reserve commercial bank, if its application is approved.
  • This could place the firm in a unique position to act as a link between traditional and decentralized finance.

Email a Friend

‘The banking pendulum is beginning to swing’: Circle plans to become a national digital currency bank

Blockchain-based payments company Circle has filed to become a national commercial bank. The news was announced in a blog post by co-founder and CEO Jeremy Allaire, which states that Circle would operate under the supervision of the Federal Reserve, the U.S. Treasury, the OCC and the FDIC.

Circle is perhaps best known as the principal operator of USDC, the world’s second-largest stablecoin by market capitalization after Tether (USDT). Currently the ninth-largest cryptocurrency, USDC has a market value of over $27 billion.

Allaire anticipates USDC will eventually reach hundreds of billions of dollars in circulation, and he believes that full-reserve banking built on digital asset infrastructure can lead to a more efficient, safe, and resilient financial system.

“Establishing national regulatory standards for dollar digital currencies is crucial to enabling the potential of digital currencies in the real economy, including standards for reserve management and composition,” said Allaire.

The news of Circle’s intention to become a bank comes just a month after the company filed an S-4 with the SEC to go public on the New York Stock Exchange through a merger with Concord Acquisition Corp., a publicly traded SPAC. The deal valued the firm at $4.5 billion.

While a number of crypto-native firms including Paxos and Anchorage Digital have already been issued a conditional banking charter by the OCC, Circle would be the first in the industry to become a full-reserve commercial bank, if its application is approved.


Fractional-reserve banking, practiced by most commercial banks in the U.S., requires only a fraction of each depositor’s funds to be backed by actual cash. In contrast, full-reserve banking requires a bank to keep the full amount of each deposit in cash and ready for withdrawal.

The transition to a full-reserve bank would subject Circle to much greater regulatory oversight, as it would be expected to submit detailed reports of its operations and the nature of its reserves to government agencies. 

However, this may also place Circle in a unique position to act as a link between traditional and decentralized finance. It could help the firm legitimize itself to the traditional financial world without straying from its roots in the crypto world.

“With this development, the banking pendulum is beginning to swing away from ‘yield at all costs’, which encourages riskier behavior by banks and lenders, towards ‘pragmatism and conservatism’, which encourages preservation of capital entrusted to the institution,” said George Kaloudis, research analyst at CoinDesk. “This should introduce more transparency to banking in general.”

Kaloudis believes Circle’s commitment to more conventional lending practices would expand the margin of safety that traditional finance companies associate with crypto-native businesses. This could help bring about broader institutional interest in the entire cryptocurrency ecosystem.

“If the issuer of a major stablecoin becomes a federally regulated bank, a lot of the haze surrounding ‘shadowy super coders’ would naturally shift towards less skepticism and greater acceptance,” he said.

The high degree of regulatory oversight on Circle’s activities would bring more transparency to the emerging stablecoin asset category, possibly increasing investor interest and speeding up institutional adoption of USDC.

“Other U.S.-based stablecoin issuers may well have to consider a similar move if we discover that the Circle Bank has an unassailable advantage to gathering assets into USDC, at the expense of much slower growth for other stablecoins,” said Asi De Silva, managing partner at investment advisory firm RockDen Advisors.

Circle’s move to become a publicly traded company could also help legitimize the stablecoin industry in the eyes of investors and regulators. Even if the banking license doesn’t come through, becoming a publicly listed company would lead to much greater scrutiny and improved reporting standards. 

“Post-listing, Circle will have to adhere to SEC rules and regulations, which will be a notable improvement for USDC owners. In my view, this will also influence how the SEC regulates the rest of the digital asset economy,” said De Silva. “If the SEC is comfortable with a stablecoin issuer going public, how much longer can it keep bringing up a lack of investor protection to turn down crypto ETF applications?”

0 comments on “‘The banking pendulum is beginning to swing’: Circle plans to become a national digital currency bank”

Outlier OpinionsMakers

10-Q, Member Exclusive

The debt ceiling deal may have saved the US from defaulting on its debt, but where does this leave the stock market?

  • The passing of the bill may have saved the immediate trouble of defaulting but it could be months before investors and the stock market regain their stability.
  • SoFi stock rose nearly 31% in the past week because of the new debt ceiling deal.
Sara Khairi | June 05, 2023
10-Q, Member Exclusive

Who will succeed James Gorman at Morgan Stanley?

  • Morgan Stanley's James Gorman is calling it a day. “No plans to go out like Logan Roy,” the fictional CEO from HBO’s Succession, he says.
  • Wise shares dropped nearly 7% Thursday after the firm announced this week that its CFO, Matt Briers will be stepping down in March 2024.
Sara Khairi | May 30, 2023
10-Q, Member Exclusive

Guilty or not guilty: Deutsche Bank is ready to pay $75 million in Epstein settlement

  • Deutsche Bank hasn’t come clean about its involvement with the Epstein crime. However, the bank addressed the situation by saying that it has strengthened and invested in its anti-financial crime controls.
  • Upstart is up almost 80% in 2023 so far. The news of multiple funding agreements being worked on by the company rebounded the stock nearly 47% in a week.
Sara Khairi | May 22, 2023
Banking, Lending, Member Exclusive

Unlicensed lending, misleading practices, and legal actions: Is SoLo Funds in trouble?

  • Attorney General for the District of Columbia and the California DFPI have penalized SoLo Funds for breaching a number of consumer protection laws.
  • The DFPI also issued a consent order for the Black-owned firm, which is raising eyebrows and more questions.
Sara Khairi | May 17, 2023
10-Q, Member Exclusive

Robinhood’s losses override revenue, PayPal’s stock dips, while Dave delivers more than expected in Q1

  • Everything investors need to know about Robinhood, PayPal, and Dave’s Q1 2023 earnings.
  • Some important fintech stocks are on the path to recovery, while others crashed on Q1 earnings.
Sara Khairi | May 15, 2023
More Articles