Why Circle, Ripple, Fidelity are chasing national trust bank status
2025 has been a lively year for blockchain and digital currency businesses, and there's no sign of that slowing down. Some digital currency companies have reached a point in their lifecycle where the focus is on proving maturity, building credibility, and positioning themselves as the go-to provider for blockchain and digital asset services. Circle (NASDAQ: CRCL) is a prime example of this; it is fresh off its IPO and has now applied to establish a national trust bank.
Why Circle wants a national trust bank
A national trust bank is a federally chartered institution that focuses on activities like safeguarding assets, managing investments, and offering custodial services. Although national trust banks don't take deposits or make loans like traditional banks, they can custody assets, manage client funds, and build financial products on top of that infrastructure.
Right now, Circle operates in a regulatory gray zone. It issues USDC, but since Circle is not technically a bank, it has to rely on partnerships with other financial institutions to custody its reserves. As of 2023, Circle's cash reserves are custodied by The Bank of New York Mellon Corporation (BNY Mellon) (NASDAQ: BK), and BlackRock (NASDAQ: BLK) manages its fund. But by establishing a national trust bank, Circle can cut out middlemen like BNY Mellon and BlackRock and directly custody and manage its assets. In addition, it will be able to custody and safeguard customer funds, as well as build financial products on top of the assets they are custodying.
What Circle's really chasing here is vertical integration. Right now, they depend on third parties to custody cash, manage reserves, and facilitate the transactions related to those activities. However, a national trust bank allows them to bring everything in-house. If approved for the national trust bank, Circle will be able to issue USDC, custody the underlying assets, and build financial products directly on top of what they hold without relying on any third parties. This is crucial to the company given where blockchain and digital currency seem to be heading. When you combine that with the credibility Circle would receive from being regulated by the Office of the Comptroller of the Currency (OCC), it becomes even clearer how and why Circle is pursuing a national bank charter and how they plan to position themselves. Why digital currency's biggest players are racing toward regulation
There's a wave of blockchain and digital asset regulation on the table. If they pass, it will open the doors for financial institutions and accredited investors, many of which have been sidelined due to the industry being a regulatory gray area, to invest in crypto products. These institutions, which manage multi-billions, will likely not want to build their own digital currency infrastructure from scratch. They will want to plug into something that already exists, that is regulated, battle-tested, and deemed institutionally safe; Circle's national trust bank could check all those boxes.
The more credibility a digital currency incumbent like Circle can build, the better. Not every digital currency-native firm has the credentials or regulatory oversight needed to work with institutional investors. However, players like Circle, which have gone public on a U.S. stock exchange (meaning they are regulated by the SEC) and are now applying to establish a national trust bank (which means they would be regulated by the OCC if approved), will be in a position of strength when it comes to providing service to traditional financial institutions. The players who voluntarily step into regulation, get the proper licenses, and build the right structure will be the ones institutional capital flocks to. In many cases, financial institutions are prohibited from working with anyone who doesn't check those regulatory boxes.
The race to become digital currency's institutional backbone
With all of this unfolding, you can expect more of the digital currency incumbents reaching maturity to follow Circle's lead, filing to go public, applying for national bank and trust charters, and doing whatever it takes to boost their credibility. For the foreseeable future, credibility will probably mean a stamp of approval or oversight from a government agency or regulator.
As the road clears for traditional financial institutions to enter the digital currency arena, they will need trusted service providers. If they haven't already started, they will be looking for partners who are already regulated and who have a good track record. The companies that meet that criteria and accumulate the right credentials will have the green light to do business with traditional financial institutions, and the companies that are already in this position will be the first in line to capture that demand.
Of course, when one company like Circle begins to take steps in this direction, other companies take note and start following the same playbook. Not long after Circle announced its application to become a national trust bank, Ripple revealed that it had applied for a national trust bank charter and a Federal Reserve master account.
True to our long-standing compliance roots, @Ripple is applying for a national bank charter from the OCC. If approved, we would have both state (via NYDFS) and federal oversight, a new (and unique!) benchmark for trust in the stablecoin market.
Earlier in the week via… https://t.co/IdiR7x3eWZ
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