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Circle, the co-creator of the USDC stablecoin, announced its intention of becoming a full-reserve national commercial bank. This comes shortly plans of the company to go public were revealed.
Circle filed a proposal with the Securities and Exchange Commission (SEC) on the 6th of August. If the proposal is approved, their proposed digital currency bank will be operating directly under the supervision of the U.S. Treasury, The Federal Reserve, The Office of The Comptroller of the Currency, and the Federal Deposit Insurance Corporation. Circle will not be the first crypto company turned bank. Cryptocurrency exchange are already recognized under Wyoming state law. Paxos and Anchorage have already received conditional approval of the OCC national bank trust charter.
In the official announcement, Circle Chief Executive Officer, Jeremy Allaire, stated:
“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.”
In the S-4 filing with the SEC, the company stated:
“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.”
Currently, Circle only abides by money transmission regulations. Should Circle indeed become a bank, it would be subject to government oversight and tight rules and regulations.
The stricter regulations would then also include Circle to publish details about its reserves, to a far more detailed extend than it currently does voluntarily.
Circle’s announcement comes just a month after it announced plans of going public on the New York Stock Exchange. Circle’s CEO said at the time:
“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. 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.”
USDC is the second largest stablecoin behind Tether. Together with Coinbase, Circle manages over $2.75 Billion in USDC. The USDC tokens are backed by an equal amount of cash and other assets such as bonds.