Circle applies for US bank charter soon to bolster stablecoin venture

Stablecoin issuer Circle is in discussions with US regulators to become the fourth crypto-native company to score a federal trust charter through the Office of the Comptroller of the Currency (OCC).

Circle CEO Jeremy Allaire told Bloomberg that the Boston-based fintech is “making good progress” over securing a bank charter. If approved, that would make Circle a federally regulated entity offering custody services, stablecoin management, payment, exchange and other services.

“They’ve been doing a lot of work laying the groundwork for how they’re going to supervise crypto, how they’re going to supervise stablecoin issuers specifically,” Allaire added.

The blockchain firm signaled a willingness to obtain the OCC’s nod back in August 2021. Since then, it has 18 months to execute on its business plan and show the OCC that it can operate safely. At the end of that period, the regulator will evaluate Circle’s operations and determine whether it will sign off on a final charter.

With the approval, Circle would join Anchorage, Paxos Trust, and Protego Trust who received preliminary approvals to become the only national trusts that were born in the crypto ecosystem. In particular, the approval indicates that the OCC was comfortable with these firms as custodians, which is significant for an industry prone to hacks.

Circle raised nearly $1 billion

Kraken and Avanti have also secured approval from Wyoming state regulator to launch a crypto bank under an SPDI charter. A Special Purpose Depository Institution charter permits its holder to operate an independent bank, which reduces reliance on third-party financial institutions and allows it to provide deposit-taking, custody and fiduciary services for digital assets.

Circle expects to serve as a compliant bridge to the US dollar payments system and its stablecoin USDC. However, it will be required to comply with all federal and state laws, including ‘know your customer’, anti-money laundering and related regulations. It will also comply with SPDI and digital asset laws, which include requirements that fiat deposits be 100% reserved and meet the consumer protection standards.

Circle made headlines this week when it raised $400 million in new funding, led by BlackRock, the world’s largest asset manager with almost $8 trillion in AUM. This round, plus the $440 million raised in 2021 and a $110 million Series E the stablecoin issuer collected in 2018, brings its total funding to nearly $1 billion.

In addition to its investment and role as a primary asset manager of USDC cash reserves, BlackRock has entered into a partnership with Circle to explore capital market applications for its stablecoin.