Although there would be additional regulatory scrutiny as a result of Circle Internet Group Inc.’s bid to open a digital currency bank, some experts have praised the plan because it would enable the stablecoin issuer to compete with more established trust banks and grow its clientele and product offerings.
Tuesday’s morning trading saw Circle’s stock (CRCL) oscillate near the flatline, but around midday, it began to rise. In recent afternoon trading, it was up 5.3%, reversing a 5.4% intraday loss earlier.
The stock has soared 516% since going public on June 5th, surpassing the company’s initial public offering price of $31 per share.
Circle announced on Tuesday that it has applied to create a national trust bank, First National Digital Currency Bank, N.A., to the U.S. Office of the Comptroller of the Currency, which is a division of the Department of Treasury that oversees and charters all national banks.
According to the company, if authorized, the trust bank would provide digital asset custody services to its institutional clients and supervise the administration and distribution of its flagship USDC stablecoin (USDCUSD). Additionally, it would assist Circle in fulfilling its obligations under the new Genius Act legislation, which includes consumer protection safeguards.
According to Jeff Cantwell, an analyst at Seaport Research, if the new trust bank is approved, Circle will be subject to more stringent oversight by the Federal Reserve and OCC, but it will also be closely aligned with any future regulatory developments, such as those pertaining to dollar-denominated stablecoins like USDC.
“We like the move – Circle stands to gain greater regulatory clarity as well as broader market access by eventually becoming a national trust bank,” Cantwell said in a note sent to MarketWatch.
According to Circle CEO Jeremy Allaire, the company will move closer to its objective of incorporating digital assets into the larger American financial system by creating a national digital-currency trust bank.
“If it does get a charter, that would help Circle compete with existing national trust banks, which hold customers’ financial assets, like stocks and bonds, in custody,” Seaport’s Cantwell continued.
In afternoon trade, State Street Corp.’s stock (STT) increased 1%, while shares of trust bank Bank of New York Mellon Corp. (BK) dropped 0.7%.
“Digital-asset custody is an area to watch, and we also would expect there should be greater opportunity for Circle in other areas where it would like to grow, such as payments,” Cantwell stated.
