According to an official statement released on its website, Circle intends to become a full-reserve national commercial bank, operating under the supervision and risk management requirements of the Federal Reserve, the U.S. Treasury, the OCC and the FDIC. We believe that full-reserve banking, based on digital currency technology, can lead not only to a radically more efficient, but also more secure and resilient financial system.
USDC is Circle’s cryptocurrency launched about three years ago. This currency has grown to become an important infrastructure for the new digital currency-enabled financial system. From the outset, Circle, in partnership with Coinbase and through the Center Consortium, designed USDC to comply with stringent regulatory and supervisory standards for money transmission in the United States. Now, with more than $ 27.5 billion USDC in circulation, Circle is gearing up to become a US national commercial bank.
From the outset, USDC reserves have been constrained by the investment rules permitted under US state regulations. These rules, and Centre’s standards, are designed to protect consumers and ensure 1: 1 dollar liquidity. To give the market further reassurance, in addition to regulatory oversight, the Company has consistently and voluntarily issued independent monthly third-party statements regarding the sufficiency of USDC reserves. Additionally, these claims have recently been expanded to include details on the composition of USDC reserves, including the credit quality of the underlying assets. It can be seen, from Circle’s latest statement, that USDC’s reserves are made up of cash, cash equivalents, and other high-quality assets, all issued in the U.S. rather than overseas and consistent (of course) with regulators’ requirements.
In the commercial banking sector, the global standards for liquidity are based on Basel III, with standards to ensure that banks can provide 1:1 dollar liquidity to depositors even during extremely-rare high-stress periods, with sustained large outflows for a full 30 days. Basel III mandates that banks must maintain sufficient High Quality Liquid Assets (HQLAs) to ensure they can meet the liquidity demands of such a stress situation. Basel III defines the Liquidity Coverage Ratio (LCR) as the amount of HQLAs on a bank’s balance sheet divided by the expected net outflows in a 30 day stress case, and mandates that banks maintain their LCR above 100%.
Circle, in the cryptocurrency sector, has been characterized as a virtuous example of a company that has grown with a careful eye on the relevant regulations, as opposed to many exchanges that are having problems recently due to complaints from customers and regulatory agencies.
Circle, in cryptocurrency sector, has been characterized as a virtuous example of a company that has grown with a careful eye on the reference regulations, like other positive examples of Coinbase and the Italian exchange Coinbar.io. Conversely, many exchanges that have exploited regulatory holes allowed by the speed of growth of blockchain technology are now having problems due to complaints from customers and regulatory agencies, as happened to Binance.
