Multiple issuers apply for U.S. trust licenses as stablecoin industry races to establish foothold?
TechFlow Selected TechFlow Selected
Multiple issuers apply for U.S. trust licenses as stablecoin industry races to establish foothold?
Within just four days, two major stablecoin giants have successively launched critical compliance initiatives within the U.S. financial regulatory system.
Navigating Web3 tides with focused insightsBy Pzai, Foresight News
On June 30, stablecoin issuer Circle submitted an application for a U.S. national trust bank charter to the Office of the Comptroller of the Currency (OCC), aiming to establish a nationwide trust bank in the United States. On July 2, Ripple followed closely behind by filing its own application for a national banking charter. Previously, its subsidiary Standard Custody had applied for a Federal Reserve master account with the intent to directly custody reserves for RLUSD. Within just four days, two major stablecoin giants launched pivotal compliance initiatives into the U.S. financial regulatory system.
As one of the key financial strategies during Trump’s presidency, stablecoins align well with the potential demand for payments and U.S. Treasuries under the dollar system. At a time when the stablecoin industry is rapidly materializing, why are stablecoin firms so eager to obtain U.S. licenses?
GENIUS Act Catalyst: Federal Licenses Become Make-or-Break Threshold
The driving force behind this licensing race is the Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act), passed by the U.S. Senate in mid-June. This legislation establishes for the first time a systematic framework: stablecoin issuers must become “permitted payment stablecoin issuers” and meet either federal or state-level regulatory requirements.
Two critical provisions in the bill have directly spurred issuers to pursue licensing:
Asset Segregation and Custody Requirements
-
Reserve assets backing compliant stablecoins must be held separately from the issuer’s corporate funds, invested exclusively in highly liquid assets such as cash and short-term U.S. Treasuries, and prohibited from re-pledging or leveraged operations.
-
In the event of issuer bankruptcy, reserve assets are treated as trust property and must be used first to repay token holders—taking priority over general creditors.
Financial Institution Qualification Threshold
-
Issuers must hold a federal license (from the OCC, Federal Reserve, or FDIC) or an equivalent state-level license; unlicensed entities will be barred from operating in the U.S.
-
Tiered Regulation by Scale: Issuers with stablecoin circulation ≤$10 billion may opt for state licenses; those exceeding this threshold must upgrade to a federal license or downsize their issuance.
The GENIUS Act positions stablecoins as payment tools rather than investment vehicles through two key design choices: “de-interesting” (prohibiting interest payments to users) and a “technical backdoor” (mandating built-in freeze/destroy functions), thereby providing law enforcement with channels for compliance intervention.
As stablecoin issuers accelerate integration into the mainstream financial system, the divide between state and federal regulatory frameworks is profoundly reshaping industry competition. Fragmented state-level regulation has placed issuers in a compliance quagmire—for example, even after passing the rigorous BitLicense review by the New York State Department of Financial Services (NYDFS), Ripple’s RLUSD still faces months of effort to sequentially apply for licenses in California, Texas, and other states, each requiring $50,000 to $200,000 in fees and localized compliance teams. Divergent regulatory standards across states further reduce operational efficiency: reserve audits range from quarterly to semi-annual, disclosure norms vary significantly, and regulatory fragmentation forces stablecoin businesses to design around the lowest common denominator.
Ripple’s current OCC application goes further. It aims to layer federal oversight from the OCC atop its existing NYDFS regulatory framework, targeting a dual “state + federal” supervisory structure. If its subsidiary secures access to a Federal Reserve master account, RLUSD reserves could be deposited directly into the Federal Reserve system. Holding reserves at the federal level drastically reduces cross-jurisdictional compliance costs. Ripple CEO Brad Garlinghouse declared this would set a “new benchmark for trust” in the stablecoin market.
The 2023 Silicon Valley Bank (SVB) crisis caused panic when $3.3 billion in Circle’s reserves were trapped in SVB, leading USDC to briefly depeg and shaking market confidence to its core. A central goal of Circle’s national trust bank application is to gain the authority to self-custody its reserves, eliminating reliance on commercial banks and fully removing the risk of contagion via bank runs.
The OCC offers not only nationwide single-point entry but also reshapes the industry ecosystem through three mechanisms: direct deposit of stablecoin reserves into the central banking system eliminates commercial bank failure risk and enables real-time settlement; it grants issuers SEC-recognized “qualified custodian” status, allowing them to custody tokenized stocks and bonds for institutional clients, thus enabling Circle to enter the digital asset custody market; most importantly, OCC charters automatically cover all state money transmission licensing requirements and apply uniform risk-weighted capital standards, avoiding inconsistencies in capital adequacy ratios across states.
The pursuit of banking licenses by stablecoin issuers is no overnight endeavor, but rather the culmination of years of compliance evolution. Take Circle: on July 2, 2024, it successfully obtained the first Electronic Money Institution (EMI) license under the EU’s MiCA framework, enabling compliant issuance of USDC and the euro-backed stablecoin EURC across 27 countries. In the Middle East, Circle secured preliminary approval from Abu Dhabi’s Financial Services Regulatory Authority (FSRA), targeting critical use cases in oil-dollar settlements on-chain.
The high-barrier licensing regimes established by local regulators have turned such costly compliance efforts into formidable moats. For instance, the substantial capital requirements (€350,000) and operational reserves mandated by the EU’s MiCA framework have already driven many smaller issuers out of the market. Meanwhile, Circle gains privileged access to the EU’s 450-million-person market, delivering a decisive competitive advantage over rivals.
As licensing applications progress, stablecoins are evolving beyond mere transactional instruments into core components of financial infrastructure. Circle’s Chief Strategy Officer Dante Disparte stated plainly that federal oversight will transform the company into a “digital executor of the U.S. dollar,” reshaping the global flow of dollars.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
Foresight News
