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

On July 10 the Office of the Comptroller of the Currency approved Circle National Trust, allowing Circle to operate a federally supervised national trust bank focused on fiduciary digital-asset custody. Circle described the decision as “a major step for USDC.”

The OCC’s conditional approval, first outlined in December 2025, described the institution as a trust bank conducting trust-company activities and made clear the custody entity will remain separate from Circle’s stablecoin issuance function. Circle plans to open the trust with custody services for Circle and its affiliates and lists reserve management as a future capability.

Circle’s July 13 transparency update showed about $72.95 billion of USDC in circulation and roughly $73.15 billion in reserve assets. Approximately $11.55 billion, or about 16%, was held in bank deposits, while about $61.6 billion, or 84%, was held in overnight reverse repurchase agreements and Treasury bills maturing in under three months.

When a customer withdraws funds from a regional bank to buy USDC, Circle backs the stablecoin with cash, repo or short-term Treasuries. The seller of those Treasuries may redeposit the proceeds at a different bank, keeping dollars in the system while shifting the funding source away from the original local lender. For smaller banks that underwrite loans against deposits they hold, that reallocation can reduce access to low-cost funding.

Banks have warned that wider stablecoin use could change where loan funding is supplied and weaken local deposit funding. In January, Standard Chartered estimated stablecoins could draw about $500 billion from U.S. bank deposits by the end of 2028. A Federal Reserve FEDS Note published in December 2025 presented lending scenarios ranging from a $65 billion decline in a low-adoption case to $1.26 trillion in a high-adoption case that assumed stablecoin issuers gain access to Federal Reserve master accounts. A Federal Reserve follow-up in May 2026 noted that outcomes depend on where stablecoin demand comes from, what users give up when converting deposits, and where issuers hold reserves.

For regional lenders, changes in funding composition are the immediate concern. If deposit balances migrate into a few large institutions or into repo and Treasury holdings, community banks may need to raise deposit rates, turn to more expensive wholesale funding, slow balance-sheet growth, or reduce lending. The shift toward short-duration, highly liquid reserves increased after the 2023 disruption linked to Silicon Valley Bank.

The OCC charter gives institutional counterparties clearer regulatory grounds to integrate USDC into custody, settlement and corporate treasury operations. Federal supervision reduces some legal and reputational hurdles for banks, payment firms and asset managers considering on-chain dollar use. Banks are also developing tokenized deposits and bank-backed stablecoins.

Regulators and lawmakers are focusing on how stablecoins should be supervised and how close private digital dollars should be to traditional bank deposits. The trust charter provides a clearer legal footing for institutional integration while questions remain about stablecoins’ effects on local credit supply.