How do stablecoin issuers gradually turn into banks, step by step?

Author: Corundum | Corundum

I. Introduction: Circle Receives Approval for a National Trust Bank License

On July 10, 2026, Circle announced that it had received unconditional final approval from the U.S. Office of the Comptroller of the Currency (OCC), formally establishing a National Trust Bank (First National Digital Currency Bank, N.A.). This entity will operate under the name Circle National Trust. On the day the news was released, Circle, the issuer of USDC, saw its stock price (NYSE: CRCL) surge by more than 10% in pre-market trading, before ultimately closing up by about 5.7%. With this approval taking effect, Circle’s flagship product USDC and the custody infrastructure for its underlying assets have been officially brought under the U.S. federal regulatory system.

Circle chose to apply for a national trust bank rather than a traditional full-service commercial bank. A national trust bank is a special-purpose financial institution whose core business is strictly limited to entrusted custody of digital assets and fiat currency. It is specifically responsible for safeguarding assets on behalf of customers according to the law’s high-security standards. However, the law explicitly prohibits it from absorbing everyday retail deposits from the public in the way an ordinary commercial bank does, or from using customer funds to extend commercial loans to third parties.

This non-commercial-bank positioning—“no deposit-taking, no lending”—creates significant architectural advantages for crypto and stablecoin companies. Because it does not trigger the statutory definition of a commercial bank, a national trust bank and its parent company can be exempt from the requirements of the Bank Holding Company Act, do not need to pay premiums to the Federal Deposit Insurance Corporation (FDIC), and do not have to fulfill social obligations to provide credit to low- and middle-income communities. That means Circle, while gaining nationwide compliance credibility endorsement at the national level, also avoids the extremely burdensome capital constraints and compliance operating costs faced by traditional commercial banks.

II. Regulatory changes drive an application surge

The U.S. financial market saw an unprecedented federal licensing application boom from late 2025 to early 2026, and Circle is among the participants. According to publicly available market information, within a short 83-day window, the OCC received or conditionally approved national trust bank license applications from a total of 11 crypto companies and fintech firms. This number not only exceeds the combined total of similar license applications over the past several years, but also marks a restructuring of the underlying financial infrastructure. The most important policy driver behind this application wave comes from the GENIUS Act (the U.S. Stablecoin Law), signed in July 2025. The act establishes the first comprehensive federal regulatory framework in the U.S. specifically targeting payment stablecoins.

Under the act, obtaining “Approved Payment Stablecoin Issuers” (PPSI) status is a prerequisite for legally issuing stablecoins. Only institutions that undergo strict review by the federal or state governments and obtain this qualification are allowed to issue and manage stablecoins for the public. For this qualification, the act sets two core standards:

1. Statutory asset reserve requirements. Payment stablecoins must be fully supported at least 1:1 by highly liquid, low-risk assets. In other words, for every $1 of stablecoin that a stablecoin company issues on-chain, it must hold $1 of cash or highly secure short-term U.S. Treasury bills in real-world bank accounts, ensuring that users can redeem their digital assets back to real fiat money, dollar for dollar, at any time.

2. Revenue prohibition provisions. The act explicitly prohibits issuers from paying stablecoin holders any form of interest or earnings. This means the law does not allow stablecoins to pay users interest the way traditional bank deposits or investment products do. The core purpose is to clearly position stablecoins solely as payment and settlement tools, preventing them from being treated as high-risk investment products.

Beyond meeting the act’s rigid regulatory requirements, reducing compliance costs substantially is another major driver pushing crypto companies to move toward “banking.” In the past, the U.S. payments and digital asset industry was constrained by a highly fragmented state-level regulatory system. If crypto companies wanted to legally offer stablecoin issuance and asset custody services nationwide, they typically had to apply for and maintain “money transmission licenses” (MTLs) separately in all 50 states. Applying for licenses state by state not only costs millions to tens of millions of dollars each year, but also requires dealing with regulatory scrutiny that differs from place to place.

Meanwhile, the national trust bank licenses issued by the OCC give licensed institutions “federal priority.” Because federal-level laws and authorizations rank above state laws, Web3 companies that obtain a national bank license are like getting a nationwide universal pass: they can cover the entire U.S. with a single set of federally unified highest standards. This exempts most of the repeated MTL application requirements across states, enabling compliance costs to be centralized and streamlined.

III. Ultimate goal: Direct connection to the underlying settlement system

If meeting compliance requirements and lowering costs are the real-world considerations for crypto companies applying for licenses, then getting rid of reliance on traditional commercial banks and seeking independence in access to underlying funding settlement is their long-term strategic goal of moving toward “banking.”

Under the current financial structure, the vast majority of crypto companies themselves do not have the qualification to directly access the country’s underlying financial network. They must rely on traditional commercial banks as intermediaries to hold billions or even hundreds of billions of dollars in stablecoin cash reserves. This model of heavy reliance on third-party deposit institutions exposes crypto companies to extreme “single point of failure” risk. Put simply: if a crypto company stores all its cash reserves with only a few traditional commercial banks, and those partner banks face liquidity runs or declare bankruptcy, the company’s funds would be frozen immediately, causing its business to be paralyzed.

The March 2023 collapse of Silicon Valley Bank (SVB) fully exposed this systemic weakness. At the time, Circle had more than $3.3 billion in reserves stored at SVB. The bank’s sudden run and subsequent takeover temporarily restricted this portion of funds, directly triggering price volatility for USDC in the secondary market. After becoming a federally regulated national trust bank, Circle can internalize the custody and management of underlying assets, effectively cutting off this contagion risk originating from external traditional banks.

More importantly, obtaining a federal-level banking license provides Web3 companies with a potential path to directly connect to the Federal Reserve payment systems. Under U.S. financial regulations, institutions holding a federal bank license are legally eligible to apply to open a Master Account or a new type of payment account with the U.S. central bank (the Federal Reserve). With such an account, the institution can directly participate in national-level funds clearing—essentially obtaining a direct channel into the highest-tier national vault.

Once a crypto company is approved to access the Federal Reserve’s underlying payment systems (such as Fedwire or FedNow), it will bring substantial “settlement de-intermediation” advantages. Simply put, in the past, when users exchanged and transferred fiat and digital assets, the process required multilayer reviews by multiple intermediary banks, with fees deducted at each stage. In the future, licensed Web3 companies can complete clearing directly within the central bank system in one step. This would not only significantly shorten cross-border settlement times, but also eliminate the costs of a large number of intermediaries, fundamentally changing the efficiency of exchanging digital assets and fiat currency.

IV. Two-track market

Another characteristic worth noting is that during this application surge, each institution mainly adopted two approaches: one is “new applications,” meaning the company builds from the ground up, fully establishing a new institution in strict accordance with the federal highest standards; the other is “license conversion,” meaning a company that originally holds a state-governed local trust company qualification directly applies to upgrade to a federally governed national trust bank, so it can integrate into the mainstream financial system more quickly.

As this batch of OCC national trust bank licenses continues to roll out, industry research institutions generally believe that the crypto industry is accelerating toward a clearly defined “two-track” competitive landscape. In simple terms, the market will be divided into two tiers. The first tier consists of the “regular troops” that hold national licenses, which will dominate the flow of large-scale funds within the industry. The second tier is made up of smaller firms constrained by limited financial strength and compliance capability, which will continue to rely on state-level local licenses.

Under the two-track system, crypto companies with federal licenses will become the core hub for handling funds from traditional institutions. Today, large traditional institutions—including pension funds, university endowments, and sovereign wealth funds—are constrained by stringent compliance requirements when entering the digital asset market. They are typically only allowed to entrust their assets to “qualified custodians” with federal backing. Because these federally licensed institutions meet the highest safety and audit standards prescribed by national law, they naturally become the preferred gateway for massive capital inflows.

By contrast, for long-tail crypto companies that cannot afford the application and day-to-day maintenance costs of tens of millions of dollars for federal licenses, they will face significant obstacles in earning trust from mainstream institutional clients. It is expected that over the next few years, as compliance thresholds are raised across the board, local licensed institutions that cannot cross the federal regulatory barrier will see severe contraction in market share. Resources and liquidity in the crypto industry will inevitably concentrate into a small number of leading national trust banks such as Circle, and the industry will undergo a round of deep reshuffling and restructuring.

V. Industry assessment and backlash from traditional finance

For Web3 companies such as Circle, receiving a national trust bank license is undoubtedly a watershed moment for industry development. In a recent report, Circle’s CEO said that the underlying compliance foundation has already been established and that the company is at a key juncture for broader market expansion. With the regulatory pathway opened up, the blockchain industry is trying to position itself as a core builder of the next generation of financial infrastructure in the U.S.

However, the OCC’s actions to issue national-level bank licenses to crypto companies have triggered strong opposition and concerns from the U.S. traditional banking industry. Key organizations representing the interests of traditional financial institutions—including the American Bankers Association (ABA), the Bank Policy Institute (BPI), and the Independent Community Bankers Association (ICBA)—have already submitted clear criticisms to regulators and demanded a comprehensive pause in the related licensing approval process.

The traditional banking industry’s main opposition first focuses on the issue of “regulatory arbitrage.” Put simply, regulatory arbitrage is when firms exploit differences between regulations and intentionally select the rules that are most favorable to them, with the lowest compliance costs. Traditional commercial banks, when acquiring and maintaining federal bank licenses, must comply with extremely high regulatory obligations. These include strict capital constraints under the Bank Holding Company Act, mandatory payment of deposit insurance premiums to the FDIC, and the obligation to provide credit to low- and middle-income communities. Meanwhile, the “national trust bank” that crypto companies are applying for is legally exempt from most of these requirements because it does not take retail deposits and does not extend commercial loans. Traditional banks argue that crypto companies enjoy “national-level banking” credibility endorsement without assuming corresponding financial obligations, creating an extremely unfair competitive environment.

In addition, the traditional banking industry has expressed deep concerns about the transmission of systemic financial risk. In letters to regulators, organizations such as BPI stated that if the stablecoin market experiences explosive growth due to the granting of federal licenses, it will inevitably siphon off large amounts of deposits from traditional commercial banks. Even more seriously, in extreme market conditions, if stablecoin holders carry out large-scale redemptions, the Web3 trust bank acting as the reserve manager would be forced to withdraw large amounts of fiat deposits held at partner commercial banks. This sudden, massive outflow of funds could directly push originally healthy traditional banks into a liquidity depletion crisis.

Finally, traditional finance industry associations accuse the OCC of, in an opaque manner during the approval process, expanding the authority of trust banks to conduct non-trust businesses. Traditional banks argue that pooling large amounts of client funds as the underlying reserve to operate stablecoin reserves is, in essence, already real substantive business similar to a commercial bank’s funding pool, going beyond the limited permissions originally granted to trust banks by law.

VI. Summary and outlook

With the enactment of the GENIUS Act and the substantive rollout of OCC national trust bank licenses, changes to the underlying infrastructure of U.S. digital finance have already begun. The most notable trend is that the stablecoin market is set to become highly concentrated. Because national-level compliance costs are extremely high, many small and mid-sized Web3 companies will find it difficult to afford them and will be forced to exit; ultimately, the market will be dominated by a small number of well-capitalized compliance giants.

In competition among leading institutions, compliance advantages are being converted into real commercial market share. Recent market trading data shows that in areas such as institutional capital parked and settlement of high-value transactions, USDC—having higher compliance certainty—is gradually surpassing other offshore stablecoin competitors that lack transparent scrutiny. This indicates that large asset management institutions and multinational enterprises are more inclined to choose underlying asset networks directly regulated by the U.S. federal authorities.

For participants in the financial institutions and Web3 industries, Circle’s approval of a federal license is only the starting point for the reconstruction of the financial system. Over the next year, the market still needs to closely monitor several key developments:

1. Publication and implementation of the GENIUS Act’s detailed provisions. According to cross-department regulatory timetables, major regulators including the U.S. Department of the Treasury, the Federal Reserve, the OCC, and the FDIC will publish proposed rules in the third to fourth quarter of 2026, and the final implementation details are expected to be released in the first quarter of 2027. Although the overall direction of the law has already been established, regulators still need to spend about half a year drafting specific execution instructions—such as how much cash a company must keep each day to be deemed compliant, and how much penalty will be imposed for violations. These details will directly determine the actual operating costs and profit margins for crypto companies.

2. Actual approval progress by the Federal Reserve for Master Accounts or payment accounts. Obtaining an OCC license is only the “ticket” to apply for Federal Reserve accounts. Whether the Federal Reserve will ultimately allow these crypto institutions to truly access the underlying national settlement network still depends on relatively high policy thresholds.

3. Legal litigation developments in the traditional banking industry. At present, relevant traditional financial interest groups are in the process of evaluating legal actions. If formal lawsuits challenging the OCC’s alleged overreach in issuing non-traditional licenses are filed in federal court, newly approved federal licenses may face the risk of being temporarily frozen, thereby delaying the deployment timeline of the entire crypto financial infrastructure.

In summary, the U.S. government has clearly abandoned plans to establish a central bank digital currency (CBDC) that is directly controlled by the government. Instead, the U.S. is bringing regulated private Web3 companies into the national financial system by passing the GENIUS Act and issuing national trust bank licenses. The ultimate purpose of this strategy is to maintain the central role of the dollar in the future global internet finance settlement system—while embracing blockchain’s underlying technical efficiencies—through strict license reviews and reserve management.