Circle's federal trust charter sharpens stablecoin bank fears

Circle's new federal trust bank approval matters because it gives USDC a clearer regulatory frame for institutional use. On July 10, the Office of the Comptroller of the Currency gave final approval for Circle to open a national trust bank, a move that can make banks, payment firms, asset managers, and corporate treasury teams more comfortable using the stablecoin.

The approval does not turn Circle into a traditional bank. Circle National Trust is set up for fiduciary digital-asset custody for Circle and its affiliates, while reserve management is listed as a future capability. The OCC's earlier conditional approval also said the trust bank is separate from the stablecoin issuance function.

Banks see a different risk. Standard Chartered said in January that stablecoins could pull about $500 billion from US bank deposits by the end of 2028. A December 2025 Federal Reserve note estimated lending could fall by $65 billion to $1.26 trillion, depending on adoption and where reserves are held.

Circle's latest reserve data helps explain that concern. As of July 13, USDC circulation was about $72.95 billion, backed by roughly $73.15 billion in reserves. Only about $11.55 billion sat in bank deposits, while about $61.6 billion was held in overnight reverse Treasury repo and short-term Treasury bills. That keeps reserves liquid, but shifts funding away from ordinary bank lending.