Circle Intends to Become a Full-Reserve National Commercial Bank

Circle, a cryptocurrency fintech services company, announced it intends to become a full-reserve national commercial bank. This would bring a set of responsibilities and duties to the company equal to those of other mainstream banks: having to report to the Federal Reserve, U.S. Treasury, OCC, and the FDIC. However, it would also put the company in a unique position to link blockchain and traditional finance.

Circle Aiming to Become Full-Reserve Bank

Circle, a cryptocurrency fintech services company part of the Centre consortium, the issuer of USD Coin, has revealed in a blog post yesterday it intends to become a full-reserve national commercial bank. The announcement was made by its CEO Jeremy Allaire in a post where he explains the journey the company will have to undergo to reach that goal. Allaire stated that, since its inception, Circle has intended to become a financial institution.

And now that its flagship stablecoin, USD Coin, has reached a critical issuance mass of more than $27 billion dollars, it’s time to take things a step forward. Allaire stated:

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.

The company is embarking on this new journey because it anticipates a boom in the growth of USDC that will ostensibly be a crucial asset in the future of the cryptocurrency market. Allaire state that it is important to establish standards for these currencies. He stated:

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.

USD Coin Controversy

Allaire addressed the worries of some customers and analysts in the cryptocurrency market, who have stated that USD Coin is not backed 1:1 by cash or cash equivalents. He recognizes that while the company has strived to maintain a high level of transparency, publishing attestations of its holdings, critics have valid points when it comes to “fundamental questions of liquidity, including liquidity in times of intense demand to redeem Usdc.”

For this reason, Allaire stated that now Circle will “begin to publish information about the fundamental liquidity of USDC and our liquidity coverage under Basel III,” a protocol that defines the Liquidity Coverage Ratio banks must maintain to serve users in high-stress periods.