Circle wins OCC trust charter; banks warn $500B outflow

On July 10 the Office of the Comptroller of the Currency approved Circle’s application to open Circle National Trust, a federally supervised national trust bank focused initially on fiduciary custody of digital assets. Circle described the charter as a “major step for USDC.” The OCC’s conditional approval from Dec. 12, 2025 described the proposed institution as a trust company and specified that custody activities would remain separate from the stablecoin-issuance function. The charter does not authorize branch-based, deposit-taking retail banking.

Circle’s transparency report on July 13 showed $72.95 billion in USDC circulation and about $73.15 billion in reserve assets. Reserves included roughly $11.55 billion in bank deposits, $54.09 billion in overnight reverse repurchase agreements and $7.51 billion in Treasury bills maturing in under three months. About 84% of the reserve was held in short-duration government-backed instruments and roughly 16% in bank deposits.

Some banks have warned that wider stablecoin use could shift funding away from community and regional banks. Standard Chartered estimated stablecoins could draw about $500 billion from U.S. bank deposits by the end of 2028. A December 2025 Federal Reserve staff paper modeled scenarios in which stablecoin adoption reduced bank lending by between $65 billion and $1.26 trillion depending on adoption levels and where issuers place reserves.

Funding can move without changing the total number of dollars in the system. A customer can withdraw a deposit at a regional bank to buy USDC. Circle then backs that USDC with cash, repurchase agreements or short-term Treasuries. The seller of those instruments may redeposit proceeds at another bank, often a larger institution, leaving the original bank with less low-cost funding to support loans.

Lenders that lose deposits may raise deposit rates to retain customers, replace funding in higher-cost wholesale markets, slow balance-sheet growth or reduce lending. Banks and some analysts link those funding changes to reduced credit availability in communities that rely on local relationship banking.

Stablecoins settle around the clock on programmable, cross-border rails and can spread through digital platforms faster than traditional deposit alternatives. When stablecoin products include yields, rewards or tokenized cash features, they can compete with savings as well as transactional balances. Some banks are developing tokenized deposits and bank-backed stablecoins in response.

OCC supervision gives institutional counterparties-banks, payment firms, asset managers and corporate treasury desks-greater regulatory clarity to integrate USDC into custody, settlement and treasury operations. Regulators and banks are debating how stablecoins should be regulated and how closely they may operate to deposit-like products.