Banking on crypto

For any rising juniors still hunting for a banking internship after missing the bulge-bracket recruiting window, Circle may have an opening: The stablecoin issuer just got the OCC’s approval to operate as Circle National Trust Bank, officially joining the banking club. Well, sort of.

The charter doesn’t let Circle operate like a traditional bank—it still can’t take deposits or make loans. But it does let the company directly manage the reserves backing its USDC stablecoin, reducing its reliance on third-party banks and custodians. It also brings Circle under a single federal banking regulator instead of navigating a patchwork of state-by-state rules, simplifying compliance as it expands.

Shares rose 4.99% on the news.

Banking backlash

Today’s approval gives crypto a much bigger foothold in the traditional financial system—and big banks aren’t thrilled. Stablecoins compete with one of banks’ most valuable assets: deposits. Banks use those deposits to fund loans and generate profits. But if consumers increasingly park their cash in stablecoins instead, banks have less money to lend and less interest income to earn.

That threat becomes even greater if stablecoins can pay users interest, a question currently at the center of the CLARITY Act. While the bill would ban stablecoin issuers from paying a yield, banks argue the ambiguous legal language leaves a loophole by allowing crypto companies to offer rewards through loyalty or membership programs instead. If stablecoins effectively become interest-bearing cash alternatives, consumer, small-business, and farm lending could fall by more than 20%, while community bank lending alone could drop by as much as $850 billion, banks warned.

It’s also why traditional financial firms are increasingly embracing similar technology themselves. The largest US banks are planning to launch a tokenized deposit network next year, while firms like Citigroup and BNY have already disclosed live deployments on their own blockchain-based platforms.

The next act

For crypto companies, though, today’s approval is a much-needed win. Bitcoin, the industry’s poster child, is down 27% this year as enthusiasm for crypto has faded, with investors piling into AI and other technology stocks instead.

And Circle may not be alone for long. The OCC has received applications from Coinbase, BitGo, Fidelity Digital Assets, Ripple, and Paxos, suggesting more crypto firms could soon enter the banking system.

Investors will now turn back to Washington, where a new CLARITY Act draft could emerge as soon as next week. Now that Circle has its charter, it needs Congress to make the rules of the road ahead a little less circular.—SY