What does Circle's application for a US trust bank license mean?

The world's second-largest stablecoin issuer Circle (CRCL) recently submitted an application for a federal trust bank charter to the Office of the Comptroller of the Currency (OCC). This move follows its successful IPO with a valuation of nearly $18 billion, marking a milestone in Circle's strategic transformation as the first publicly traded stablecoin in the United States.

Circle's IPO performance can be described as phenomenal. It debuted on the New York Stock Exchange on June 5 at an issuance price of $31, triggering two circuit breakers on the same day. The stock price surged to over $298, nearly a tenfold increase, with a peak market capitalization reaching approximately $70 billion—surpassing the total market capitalization of its USDC stablecoin, and being hailed by Wall Street as "one of the most undervalued IPOs in recent years."

Against this backdrop, it is worth delving into the strategic intentions behind Circle's application for a trust bank license, as well as its impact on the profit structure and industry landscape.

This license application not only concerns Circle's own positioning upgrade but may also redefine the competitive rules of the stablecoin track. What disruptive changes will it bring to Circle? How will it shape the future direction of the stablecoin industry?

What real changes can a top-tier license bring?

The National Trust Bank Charter issued by OCC is one of the high-standard licenses within the U.S. federal banking regulatory system. It allows licensed institutions:

• Provide custody services nationwide in the United States;
• Directly hold client assets;
• Access to the Federal Reserve's clearing network (such as Fedwire, FedNow);
• Regulated by the federal government rather than state-level, the compliance standards are more uniform and authoritative.

Currently, only Anchorage Digital Bank holds this type of license. If Circle is successfully approved, it will join the very few digital asset players with top federal qualifications.

Compared to currently only holding the New York BitLicense and various state money transmission licenses, this license will bring significant changes: moving from regional licensing to nationwide accessibility, from relying on third-party banks for fund custody to being able to directly control the underlying capital flows.

Profit model undergoes a qualitative change: from "floating interest sharing" to "asset control"

The biggest direct change lies in the control over the USDC reserves. After the bank license is approved, Circle will gain the qualification to directly custody, invest, and manage USDC reserve assets. This means a shift from indirectly sharing floating interest income in the past to autonomous operation of the reserve asset portfolio. In the current high interest rate environment, this will significantly enhance its profit flexibility.

At the same time, Circle will be able to provide institutional-level custody, tokenized settlement, and other value-added services. More importantly, this license will fundamentally change Circle's business structure.

In the existing system, the exchange between stablecoins and fiat currencies still heavily relies on banking infrastructure. For example, when users exchange USDC for US dollars, the funds must ultimately go through the Federal Reserve's clearing system. This capability is currently limited to financial institutions with a federal banking license. Although Circle takes on the issuance and on-chain circulation on the front end, it still needs to rely on licensed financial institutions for fund custody and clearing. This structural shortcoming was evident when Circle partnered with Paxos to launch the FIUSD stablecoin: despite having on-chain technological capabilities, the final fiat clearing process was still completed by Paxos.

If Circle obtains the license, it will be eligible to open an account with the Federal Reserve, directly embedding into the core financial clearing network of the United States, and for the first time, possessing full-process compliance capability from "fiat currency injection" to "on-chain deployment", constructing a complete closed loop of issuance-accomplice-clearing-settlement. This transforms it from a "technical channel" to a "clearing rights holder", fundamentally changing its strategic positioning.

Payment giants like Visa and Stripe are focusing their crypto strategies on leveraging existing payment network advantages to integrate stablecoins into user-friendly merchant acquiring and payment interfaces, addressing the "last mile" experience issue. In contrast, Circle has delved into the settlement layer of the financial system, becoming a financial infrastructure provider with licensed clearing authority. The "ship" provided by Circle will carry "last mile" service providers, including Stripe, enabling these payment fronts to operate on a more efficient, low-cost stablecoin network.

It is worth noting that this license does not involve the authority for demand deposits or loans, and Circle will still not become a commercial bank in the traditional sense in the future. However, as a custodian and clearing node, Circle has the capability to design on-chain payment and settlement products around "tokenized fund instructions" and can provide compliance and technical support for traditional banks issuing programmable deposit coins.

Background: Early response to policy signals

Currently, the regulation of stablecoins is becoming an important issue in federal legislation in the United States. Draft bills such as the "GENIUS Act" have explicitly proposed that higher auditing standards and federal regulatory requirements should be implemented for large stablecoin issuers. In the future, if issuers reach a certain scale, they will need to obtain a banking license to operate legally. This means that if Circle does not actively obtain federal banking qualifications, it may face the risk of tighter business boundaries or increased compliance pressure.

Circle CEO Jeremy Allaire has made it clear that this initiative aims to strengthen the positioning of USDC as a "digital dollar" and support the monetary dominance of the United States in the future global payment system.

How does the market view it? Valuation disputes under regulatory dividends.

Despite Circle's strong stock performance since its IPO, there is still disagreement in the market regarding the reasonableness of its valuation.

Circle's current profit structure is primarily based on interest income, which has advantages in a high interest rate environment. However, its service-based revenue is still in the process of being established, leading to differing views in the market regarding the sustainability of its valuation.

Barclays and Bernstein and other bullish factions believe that it has long-term advantages in compliance pathways, global issuance networks, and partnerships with institutions like Visa. In contrast, Goldman Sachs and JPMorgan are cautious about its high valuation.

From this perspective, Circle's application for a banking license is not only a compliance action but also an attempt to reshape the institutional leverage of business logic. In the future, Circle can gradually achieve a transformation from "interest margin-driven" to "service-driven" through diversified income such as custody fees, settlement fees, and clearing services. This will help alleviate market concerns about its profitability sustainability and valuation support.

Summary: Key milestones on the path to the institutionalization of stablecoins

Circle's application for a federal trust bank license is a landmark event in the institutionalization process of the stablecoin industry. It indicates that in the upcoming compliance environment, stablecoin issuers will no longer be limited to the "dollar-pegged" technical path, but must instead deeply integrate into the core clearing structure of the fiat currency system.

Future market competition will revolve around custody capabilities, clearing interfaces, compliance qualifications, and service depth. Banking licenses are likely to become a necessary threshold for a few core participants in the next cycle.