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• Circle says it will become a ‘national digital currency bank’
• move will signify federal oversight of the USDC and increase reporting requirements.

stablecoin giant Circle announced Monday that it intends to become a “national digital currency bank,” a move that would put it under the direct supervision of the Federal Reserve and various agencies that run the United States Department of the Treasury. United.

Circle CEO Jeremy Allaire, who announced the switch to a blog post, said the switch to full reserve banking would strengthen its USDC stablecoin, which currently has more than $ 27.5 billion in circulation.

stablecoin was examined last month after Circle published a report showing that while most of the USDC was backed by dollars, its reserves also included corporate bonds and commercial paper.

Allaire appeared to acknowledge the concerns about this deal, writing: ‘However, market watchers have correctly focused not only on the adequacy of reserves and credit quality, but also on fundamental liquidity problems, including liquidity over time. tensile. USDC Refund Request ».

Circle currently operates under state money transmission regulations, which are less strict than what national banks must follow.

It’s unclear from the blog post whether its plan to become a national bank will require Circle to replace the corporate bond and commercial paper portion of its reserves with dollar equivalents. Allaire says Circle has “always exceeded” bank liquidity requirements set out in an international agreement known as Basel III.

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However, it is clear that the transition to becoming a federally regulated entity will require Circle to publish more detailed reports on its operations, including the nature of its reserves.

All this in a context of growing attention to the role of stablecoins in the banking system.

Stable currencies like USDC have long been an important part of the crypto economy, allowing traders to enter and exit positions without having to go back to fiat currency. But they are also becoming increasingly important in the conventional banking system, allowing for a cheap and efficient way to make large money transfers.

Stable coin issuers like Circle, which USDC developed in partnership with Coinbase, benefit from the interest they earn on reserves.

Circle is not the first stablecoin issuer to seek a federal regulatory framework. Blockchain infrastructure provider Paxos already operates as a federal bank, as does escrow provider Anchorage.

According to Allaire, the USDA’s working value will grow to hundreds of billions of dollars in the next few years.

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