Stablecoin issuer Circle applies for US national trust bank licence after mega IPO

NEW YORK – Stablecoin company Circle is applying to create a national trust bank in the US, a major move after its blockbuster initial public offering (IPO) valued the company at nearly US$18 billion (S$22.9 billion) in June.

If the charter is granted by the US Office of the Comptroller of the Currency (OCC), it would enable Circle to act as a custodian for its own reserves and hold crypto assets on behalf of institutional clients. Unlike traditional banks, the licence would not allow Circle to take cash deposits or make loans.

Crypto platform Anchorage Digital is currently the only digital asset company with a national trust bank charter.

Circle’s national trust bank entity would be called First National Digital Currency Bank, its chief executive Jeremy Allaire told Reuters in an interview.

Circle issues the US dollar-pegged stablecoin USDC.

Stablecoins, a type of cryptocurrency designed to maintain a constant value, usually a 1:1 dollar peg, are commonly used by crypto traders to move funds between tokens. Their use has grown rapidly in recent years, and proponents say that they could be used to send payments instantly.

Stablecoins are backed by assets such as US dollars and short-term Treasury bills in order to maintain their peg to the dollar. Currently, Circle’s reserves – short-dated US Treasury bills, overnight US Treasury repurchase agreements and cash – are held in custody at Bank of New York Mellon and managed by BlackRock.

The new entity would manage Circle’s USDC reserves, although some reserves will continue to be held at major banks, Mr Allaire said.

The licence would also allow Circle to provide custody services for digital assets on behalf of institutional customers. But Mr Allaire said it will focus on providing custody for assets such as stocks and bonds that are represented via a token on a blockchain network, over traditional cryptocurrencies like bitcoin and ether.

The move from Circle comes as Congress gets closer to passing a Bill to create a federal regulatory framework for stablecoins. If signed into law, the Bill would require tokens to be backed by liquid assets and for issuers to publicly disclose the composition of their reserves on a monthly basis.

The Senate passed the Bill earlier in June, and the House of Representatives is poised to pass the legislation early this summer.

US President Donald Trump is expected to sign the Bill into law. He has sought to overhaul cryptocurrency regulation after courting cash from the industry during his presidential campaign.

Once signed into law, the Bill could pave the way for more traditional financial institutions and retailers to incorporate stablecoins into their businesses, experts and analysts say.

Circle is preparing for that eventuality, Mr Allaire said. “We’re going from the early-adopter phase of this technology into the mainstream,” he said.

“As a public company, and now, hopefully if we are successful in getting approval from the OCC as a national trust, that will give us a foundation that the world’s leading institutions are going to be comfortable building on.”

Wall Street brokerages began coverage of Circle on June 30 with broadly bullish ratings, although some analysts voiced concerns about its elevated valuation given that the stock has more than doubled since its market debut.

Barclays, Bernstein, Canaccord Genuity and Needham launched coverage with the equivalent of “buy” ratings and price targets above US$200, while JPMorgan and Goldman Sachs had more bearish outlooks. REUTERS