USDC's Circle is becoming a commercial bank

Circle, one of the two companies behind the USDC stablecoin, is looking to become a full-reserve national commercial bank. 

“Circle intends to become a full-reserve national commercial bank, operating under the supervision and risk management requirements of the Federal Reserve, U.S. Treasury, OCC, and the FDIC. We believe that full-reserve banking, built on digital currency technology, can lead to not just a radically more efficient, but also a safer, more resilient financial system,” said Circle CEO and co-founder Jeremy Allaire in Circle’s official announcement.

Although Circle officially announced its decision to become a bank in its August 9th blog post, it’s S-4 filing to the SEC on August 6th alluded to its plans to become a bank.

“As part of our strategy to reduce our dependence on third parties, we may in the future consider pursuing a U.S. national bank charter or evaluate the acquisition of a national bank. This would allow us to access the Federal Reserve System directly, reducing the costs and time for settling transactions. If we were to acquire a national bank, the acquisition would be subject to approval from the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the Office of the Comptroller of the Currency (the “OCC”) under the Bank Holding Company Act and the National Bank Act, respectively,” said Circle in its S-4.

Becoming a bank

Becoming a bank would make Circle subject to more regulations and government oversight. At the moment, Circle operates under and abides by money transmission regulations; but as a full-reserve bank–or as Circle likes to call it, a “national digital currency bank”–Circle would be overseen by four different government entities, the federal reserve, the U.S treasury, the OCC, and the FDIC. Becoming a bank and answering to these agencies would also require Circle to publish more detailed reports on its reserves, rather than “voluntarily published monthly independent third-party attestations” like it currently does.

Circle’s announcement that it is on a journey to become a bank comes just one month after Circle announced it would be going public on the New York Stock Exchange by merging with the special purpose acquisition company Concord Acquisition Corp. ($CND).

“In the coming years, we anticipate that USDC will grow into hundreds of billions of dollars in circulation, continue to support trillions of dollars in low-friction, high-trust economic activity and become widely used in financial services and internet commerce applications,” said Allaire.

“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.”

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