Crypto Firms Chase Bank Charters as Circle Launches Stablecoin Orchestration Layer

The changing cryptocurrency landscape in the United States could have a downstream impact on how businesses move, hold, store and monetize payments.

Paul S. Atkins was sworn into office as the 34th chairman of the Securities and Exchange Commission (SEC) Monday (April 21) after being confirmed by the Senate earlier this month. Atkins, who has long been personally involved with digital assets, is viewed favorably by industry advocates, who are hopeful he will use his position atop the regulatory body to drive forward regulatory clarity for the digital asset landscape.

In a sign of the evolving times, Circle, the FinTech firm best known for the USDC stablecoin, unveiled Monday an initiative called the Circle Payments Network (CPN), which aims to modernize how value flows worldwide.

CPN will connect financial institutions and enable real-time settlement of cross-border payments using USDC, EURC and other regulated stablecoins, the company laid out in a white paper.

Separately, crypto companies like Paxos and Coinbase, as well as Circle, are pursuing bank charters, The Wall Street Journal reported Monday, essentially seeking to become part of the very banking system that has historically kept them at arm’s length.

For chief financial officers, treasurers and payment executives, these trends could affect how companies manage money in the coming years.

Read also: The Digital Asset Primer: On-Chain Tokenization for Payments Professionals

At a high level, CPN is a blockchain-powered payment network that connects financial institutions (FIs) and allows them to transact using digital stablecoins as the settlement medium. Participants might include banks, neobanks, payment service providers, FinTechs and digital wallet operators.

By joining CPN, these institutions can send and receive payments globally in real time via stablecoins like USDC (a U.S. dollar-pegged coin) or EURC (a euro-pegged coin), which are redeemable 1-to-1 for fiat currency. The stablecoins effectively act as the transmittal vehicle for value, zipping from sender to receiver faster than traditional bank wires.

One key aspect is that CPN itself doesn’t move cash between bank accounts in the old-fashioned way. Instead, it coordinates the movement of stablecoins between network participants.

“Importantly, CPN does not move funds directly; rather, it serves as a marketplace of financial institutions and acts as a coordination protocol that orchestrates global money movement and the seamless exchange of information,” Circle’s white paper said.

CPN can essentially be viewed as an orchestration layer that tells participants how and when to transfer tokens (and the corresponding fiat on their balance sheets) to complete a transaction. Circle’s role is as the network operator defining the rules (the protocol) and providing the APIs and smart contracts that participants plug into.

Circle’s ultimate vision for CPN isn’t just a single product but a framework others can build upon, more akin to how the internet’s open protocols enabled a proliferation of websites and applications. For corporate finance teams, this could mean a richer array of financial services available on one interoperable network, rather than siloed portals and bank platforms.

See also: 3 Things Payment Stakeholders Can All Agree On About Stablecoins

While Circle is building out the CPN platform, it’s also part of a broader movement of crypto companies pushing into the regulated banking sector. Several crypto and FinTech firms are seeking U.S. bank charters or similar licenses right now.

It’s a striking development, given that just a year or two ago the relationship between crypto firms and banks was fraught. In 2023, after high-profile failures like FTX in the crypto industry and the collapse of crypto-friendly institutions like Silvergate Bank and Signature Bank, many traditional banks pulled back from serving crypto clients.

If successful, a company like Circle could hold customer deposits, custody reserves for stablecoins, and make loans or offer other banking services, all under the supervision of bank regulators.

There’s a growing sentiment among policymakers (on both sides of the aisle) that if stablecoins are to be a part of the financial system, they need a legal foundation similar to banks or money market funds. By obtaining bank charters or trust licenses now, crypto companies could get ahead of impending regulations and shape them.

Chartered institutions also have certain advantages. They can potentially get direct access to Federal Reserve payment systems, hold customer dollar balances in central bank accounts, and operate across all 50 states without needing a patchwork of state licenses.

For a stablecoin issuer like Circle or Paxos, being a nationally regulated bank could bolster trust among large institutions and users — essentially saying, “We meet the same standards as the bank where you hold your corporate treasury or your personal savings.”

It’s worth noting that not all these firms are pursuing the same type of charter. Circle and BitGo are reportedly aiming for full-service national bank charters. Others have considered national trust bank charters or even industrial loan company (ILC) charters.

If these charters are approved, regulators will subject the firms to bank-like scrutiny. This is a double-edged sword. On one hand, it means greater oversight and accountability (good for customers and the system’s integrity), but on the other hand, it means these companies must mature their risk management, compliance operations and capital requirements.

As crypto firms become regulated banks or trust companies, partnering with them becomes less of a reputational or regulatory risk for businesses. A Fortune 500 company might have been hesitant to hold stablecoins or use a crypto service provider when the sector was seen as the Wild West. But if that provider is now a supervised bank entity (subject to audits, capital requirements and oversight by federal regulators), it changes the equation.

Ultimately, the takeaway for business leaders is to stay informed and be prepared.

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