Circle says it wants to be a bank

US financial regulators have said that stablecoin issuers should be treated like banks. Circle, the world’s second-largest issuer, has responded, “Okay, sure.” Last week, the company announced its intentions to become a full-reserve, federally chartered crypto bank.

Let’s parse each part

• Stablecoins: Price-stable digital assets pegged to fiat currency
• Circle: A crypto payments startup that aims to SPAC. Circle’s main role in the crypto ecosystem is creating tokenized greenbacks via USD Coin (USDC). There is nearly $28 billion in USDC in circulation.
• Full-reserve bank: Not a fractional reserve bank. Circle would be holding all of its deposits in reserve.

Now, let’s read the room

Circle’s dream seems unlikely to happen. One reason why? The Fed is thinking about releasing its own central bank digital currency (CBDC). In any event, Circle will continue to position itself as a more regulated and reliable alternative to the world’s largest stablecoin: That would be Tether (USDT), which has nearly $64 billion in circulation.—RD