Circle secures federal trust bank charter as USDC revenue model faces new pressure

Traders Union
All News
Financial News
Circle gains trust bank charter

Highlights

Circle receives final approval from the Office of the Comptroller of the Currency to launch Circle National Trust as a federally regulated digital-asset custodian.
Circle's $694 million quarterly revenue remains 94% dependent on interest from USDC reserves, leaving it highly exposed to falling rates and thin fee income.
A consortium including Coinbase, BlackRock, Visa, and Mastercard launches Open USD, a direct no-fee stablecoin competitor, while Coinbase retains lucrative USDC distribution rights until August 2026.

Federal approval expands Circle's custody ambitions

As reported by Weiss Ratings, Circle receives final approval on Friday from the Office of the Comptroller of the Currency to operate First National Digital Currency Bank, doing business as Circle National Trust.

The new entity is a national trust bank rather than a conventional lender. It cannot take deposits, provide checking accounts or make loans, and initially will hold assets only for Circle itself. The structure positions it as a digital-asset custodian under strict fiduciary rules, in a role closer to what BNY Mellon or State Street provide for traditional securities than to a retail or commercial bank.

The approval gives Circle a level of federal legitimacy that remains rare across the crypto sector. Shares rise by double digits on the news, reflecting investor optimism about the company's ability to build a regulated custody business around USDC, the world's second-largest stablecoin.

Revenue dependence and partner risk come into focus

Circle still relies overwhelmingly on interest income from the reserves backing USDC, with roughly 94% of revenue coming from cash and short-term U.S. Treasurys rather than fees. The company books about $694 million in revenue last quarter, but that model remains vulnerable as lower interest rates directly weaken its main earnings engine.

Competitive pressure is also building. A consortium of more than 140 companies, including Coinbase, Alphabet, BlackRock, Visa and Mastercard, launches Open USD, a stablecoin that charges no fees and returns most reserve income to partners.

That challenge is especially sensitive because Coinbase remains Circle's most important distribution partner. Under a 2023 agreement, Coinbase collects all reserve income on USDC held on its platform and half of the income generated elsewhere, with the deal set for renegotiation in August 2026. The federal charter may broaden Circle's regulatory standing, but it also arrives just as a key partner backs a rival that targets Circle's core source of profit.

In our earlier coverage of Wall Street banks’ second-quarter earnings, we outlined how a rebound in investment banking and strong equities trading drove double-digit profit growth at major lenders. We also noted that deal flow tied to AI and data-center financing helped fuel momentum, while executives warned that today’s unusually favorable market conditions and geopolitical risks could still weigh on activity in the second half.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.