The Office of the Comptroller of the Currency granted Circle a conditional approval on December 12, 2025, to open a national trust bank. Final approval followed on July 10, 2026, allowing the USDC issuer to operate a federally chartered institution focused on digital-asset custody and reserve management. The move comes as stablecoins like USDC are poised to pull hundreds of billions from traditional bank deposits, according to recent forecasts.
What the trust bank can — and can't — do
The OCC's approval is limited. Circle's trust bank will conduct 'trust-company' activities, meaning it can hold digital assets in custody and manage reserves backing USDC. It cannot take retail deposits or make loans. That distinction keeps the entity separate from Circle's stablecoin issuance itself, but it gives the company a regulated banking charter — a first for a major stablecoin issuer.
Circle's USDC had $72.95 billion in circulation as of July 13, 2026, backed by $73.15 billion in reserves. Those reserves are heavily weighted toward short-term government securities: $61.60 billion in overnight reverse repo and Treasury bills, or 84.2% of the total. Only $11.55 billion — 15.8% — sits in bank deposits.
Stablecoins' growing threat to bank deposits
Standard Chartered predicted stablecoins could drain about $500 billion from U.S. bank deposits by the end of 2028. A Federal Reserve FEDS Note from December 2025 estimated the impact on lending could range from $65 billion to $1.26 trillion, depending on how quickly stablecoins replace traditional deposits. Smaller banks, which rely more on deposit funding, would feel the squeeze first.
The numbers reflect a broader shift. Stablecoins like USDC are no longer fringe experiments. They're gaining official legitimacy through charters like Circle's, and they're starting to compete directly with the deposit products that have long been the lifeblood of community and regional banks.
Policy debate moves from 'if' to 'how'
The conversation in Washington has changed. Lawmakers and regulators are no longer arguing about whether stablecoins should exist. The question now is how to supervise them — and how close they can get to deposit-like products without triggering the full regulatory framework that applies to banks. The GENIUS Act, a bill that would create a federal framework for stablecoins, reflects that new focus.
Circle's trust bank approval is a concrete step in that direction. It gives the company a regulated home for its reserve management, but it also raises questions about what comes next. If stablecoins can offer near-deposit functionality under a trust charter, traditional banks — especially those without the scale to compete — may find themselves fighting for a shrinking pool of deposits.
The OCC's conditional approval letter made clear that the trust bank's activities are separate from stablecoin issuance. But the line between a trust company and a deposit-taking institution is one that regulators will have to watch closely as the market grows.
