Circle won federal approval to launch a national trust bank as banks warn USD Coin (USDC) and other stablecoins could pull $500 billion from US deposits by 2028.
Key Points:
- Circle received final OCC approval on Jul. 10 to open Circle National Trust, a federally supervised national trust bank.
- Standard Chartered estimates stablecoins could drain $500 billion from US bank deposits by 2028, while a Federal Reserve note puts potential lending losses as high as $1.26 trillion.
- The new trust bank cannot take retail deposits or make loans, leaving Circle's reserve mix at the center of banks' funding concerns.
Circle Secures Trust Bank Charter
Circle received final approval from the Office of the Comptroller of the Currency on Jul. 10 to open a national trust bank, industry outlets reported. The new entity, Circle National Trust, will operate under federal supervision and focus on fiduciary custody for USDC reserves rather than conventional banking.
The bank will not accept retail deposits or issue loans, keeping it apart from ordinary commercial lenders. Circle's own announcement described the approval as a step that lets institutions treat USDC as sturdier financial infrastructure. Federal supervision, the company said, gives banks, payment firms and corporate treasuries a clearer basis for building products around the token.
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Standard Chartered Flags Deposit Risk
Standard Chartered warned in January that stablecoins could pull roughly $500 billion from US bank deposits by the end of 2028. Geoff Kendrick, the bank's global head of digital assets research, said regional lenders face the greatest exposure because they rely most heavily on deposit funding.
The Federal Reserve reached a wider range.
A Federal Reserve staff note published in December estimated that stablecoin adoption could cut bank lending capacity anywhere from $65 billion to $1.26 trillion, depending on adoption levels and where issuers keep reserves. That range widens sharply in scenarios where issuers gain direct access to Federal Reserve master accounts. Community banks, which depend most on local deposits, would feel the tightest squeeze under that scenario.
Circle's reserve breakdown, published Jul. 13, showed about $11.55 billion held in bank deposits, while roughly $61.6 billion sat in overnight repo and short-term Treasury bills. That mix keeps dollars inside the financial system but routes most of them away from ordinary deposit funding.
The debate echoes 2023, when USDC briefly lost its dollar peg after Silicon Valley Bank collapsed with Circle deposits trapped inside.
That episode pushed Circle toward a reserve mix weighted more heavily toward repo and Treasury bills, a shift now sitting at the heart of banks' funding complaints. Congress passed the GENIUS Act last year, giving stablecoins a federal framework, but lawmakers are still negotiating how closely the tokens should resemble bank deposits.
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