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Circle to Become National Digital Currency Bank

Decrpyt | Jeff John Roberts | Aug 9, 2021

Circle national digital currency bank - Circle to Become National Digital Currency BankStablecoin giant Circle announced that they will be moving toward becoming a “National Digital Currency Bank” in an attempt to strengthen their existing USDC stablecoin, currently backed by a combination of US dollars, corporate bonds, and commercial paper.

Circle’s move has outsiders wondering how the increased federal oversight will impact business. Currently, Circle operates under state money transmission regulations, which are drastically less strict when compared to the federal guidelines they must follow to gain national bank certification. Many are speculating over whether these new guidelines will require full USD backing or if their current combination of backing will suffice. Other primary concerns surrounding USDC involve liquidity issues, especially when demand may be high.

See:  More regulation coming: SEC Chairman signals stablecoins and other tokens could fall under its rules on security-based swaps

Why It Matters: The big question that has yet to be answered is whether or not federal regulators will allow Circle’s USDC to continue business as usual or if they will need to supply USD to back the asset. The $27.5 billion USDC currently in circulation is expected to grow to “hundreds of billions” in the coming years according to CEO Jeremy Allaire.

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