Circle Applies to Establish National Trust Bank in the U.S. to Manage USDC Reserves, Switching Fr...

Circle, a crypto company that issues USDC stablecoin, has applied to establish a national trust bank to manage USDC reserves on the company’s behalf and abide by US regulations. Circle has applied for the trust from the US Office of the Comptroller of the Currency (OCC). If the OCC approves, the trust would allow Circle to operate as a US-recognised trust institution. The announcement comes as US companies such as Circle try to integrate their services within traditional frameworks. Circle’s digital banking services would be better situated to provide USDC stablecoins to institutional investors, with the added benefit of custodial business services.

The Office of the Comptroller of the Currency (OCC) can now decide whether Circle can operate a regulated trust institution. The trust will effectively allow Circle to manage its USDC holdings and validate its stablecoin issuing. This move would bolster USDC’s infrastructure and make it more competitive against larger stablecoins like Tether’s USDT. The new trust will also allow Circle to align its business practices with the new Genius Act, which has strict requirements for stablecoin issuers, to ensure that consumers get a fair go when investing in digital assets. There is another reason that Circle is taking the time to meet regulatory requirements. Circle is extending the reach of the US dollar to make it more powerful and to dominate foreign markets.

The First National Digital Currency Bank, the name Circle gave to the new entity, would allow Circle to manage the custody of USDC for institutional clients. Jeremy Allaire, CEO of Circle, said that the approval would enable a financial network on the internet that is regulated yet accessible. In the meantime, BlackRock and BNY Mellon manage Circle’s USDC reserves. Allaire said the new currency bank would focus on digitising stocks and bonds. Circle maintains a strong relationship with BlackRock and BNY Mellon, wishing to use their services even with the new currency bank managing USDC reserves. Circle seems to be more interested in traditional services than working with Bitcoin or Ethereum. Circle may be trying to increase the dominance of the US dollar by seeking approval from federal and local authorities, one regulation at a time.

Jeremy Allaire, CEO of Circle, commented that the company always sought the highest standards to build client trust. Allaire said that this was why he sought out a publicly listed company in the US, and now created a national trust company, to build trust by seeking high standards. Crypto was meant to be a trustless technology from the beginning. Who are these high standards built for, institutional investors or retail traders? There seems to be a demand for trust, even when trading trustless technologies, because crypto often has to be mediated through centralised exchanges. Stablecoins usually involve one-to-one pegging of a token with a real-world asset, such as Gold or USD. Many of these US stablecoins are pegged to the US dollar. Stablecoins were used to transfer tokens on exchanges, such as between Ethereum and USDT. However, institutional investors have recently discovered that stablecoins could enable cheap transfers and fast cross-border transactions. Circle currently holds treasury bills to back up its USDC tokens. Circle employs BlackRock to manage its treasury bills

JPMorgan said that many companies, such as Amazon, MasterCard, and Walmart, may decide to create stablecoins to compete with USDC. With its IPO, Circle had such a resounding success that it may have inspired other companies to engage in stablecoin reserves. The race has begun for stablecoin dominance. But there was a stablecoin market way before the US companies started to cotton on to their potential. Tether, the largest stablecoin issuer, has been around for a long time and dominates the stablecoin market. There are serious risks involved in starting a stablecoin market. USDC already has a low share of stablecoins compared to other major issuers. Circle, therefore, may struggle to maintain dominance when other companies enter the market. Circle, however, has the advantage of maintaining a good relationship with US authorities. They may be able to extend this advantage to engaging with European markets. Circle (CRCL), meanwhile, experienced an all-time high last week at $260 on the stock market.