Circle’s attempt to obtain a bank charter is likely not a direct assault on banks, but it does threaten traditional financial institutions in more subtle ways.
“If Circle gets a charter, it reinforces the idea that stablecoins aren’t just crypto products, they’re becoming integrated into the broader financial system,” James Wester, head of cryptocurrency research at Javelin Strategy & Research, told American Banker. “Banks that haven’t thought seriously about tokenized money need to start.”
Circle, which issues USDC, the second largest stablecoin after Tether, plans to apply for a national trust bank charter. The move follows the buzz around
What does Circle want?
Anchorage Digital Bank is the only crypto-adjacent company to have such a license. Similar to an industrial bank charter, a national trust charter carries a lighter regulatory burden than owning a full bank, according to legal site
Circle did not respond to a request for comment on its application, which was first reported by
“The banking charter will open up Circle to more options around things like funding and access to Treasury markets,” Tony DeSanctis, a senior director at Cornerstone Advisors, told American Banker.
For banks, Circle’s application signals something bigger than a traditional quest to home in on banks’ territory, according to Wester. “The infrastructure behind stablecoins is maturing quickly. Issuers are now expected to offer real-time attestations, regulated reserves and full compliance tooling.”Circle’s original business focused on cryptocurrency, though in recent years
“[A license] It will be disruptive to the extent that it is a payment solution,” DeSanctis said. “Traditional payments will be disrupted more broadly, not necessarily because of the banking license.” Circle applying for a national bank seems like the logical next step in its efforts to align more directly with regulators, according to Wester, “If approved, direct access to the Fed and a unified regulatory framework under the OCC would certainly strengthen their position with institutional partners,” he said.
But charter approvals in this space have been rare, according to Wester. “It’s far from a done deal and will likely face significant public and regulatory scrutiny.”
Cutting clutter
By obtaining a bank license, Circle would reduce the expense of payment processing by reducing partnerships. That will be particularly useful as more stablecoins flood the market. “Margins in the stablecoin market are razor thin,” Richard Crone, a payments consultant, told American Banker. Crone Consulting LLC estimates stablecoin issuers could reduce infrastructure and compliance costs by 10–20% with a bank charter. “Those are critical savings in a market poised to compete directly with traditional payment payment brands.”
A bank license could also enable Circle to use its stablecoin and/or the underlying blockchain technology to improve its ability to act as a payment facilitator.
Payment facilitators are adding capabilities to avoid fees paid to sponsored acquiring banks for network access, clearing and settlement. Crone’s consulting firm estimates these third party bank providers can cost between 5 to 13 basis points of a payment facilitator’s total payment volume expense.
“Circle is doing the same in stablecoins. By applying for a national trust bank charter, they’re moving to internalize infrastructure and eliminate third-party custodians and regulatory intermediaries for digital asset custody and issuance,” Crone said.
