Nearly 30 Charter Applications Later, the Stablecoin Industry Wants to Be a Bank
Conditional national trust charters granted to Circle, Paxos and others in December opened a queue that has grown steadily, with capital requirements estimated between $6 million and $25 million.
When the Office of the Comptroller of the Currency conditionally approved national trust charters for Circle, Paxos and three other non-bank financial firms in December, it did more than admit a few companies to the federal banking system. It established that the door was open.
By the end of February, nearly 30 de novo applications had been filed since the stablecoin statute was signed.
Why a charter is worth the trouble
A federal charter buys three things a state money-transmitter license does not.
The first is uniformity. A company operating under state licenses complies with dozens of regimes, each with its own examination cycle and reporting requirements. A national charter replaces that with one supervisor.
The second is credibility with institutional counterparties. Corporate treasurers and banks apply different diligence to a federally chartered trust company than to a licensed money transmitter, and that distinction determines who is willing to hold balances.
The third is durability. A charter is difficult to obtain and difficult to lose, which is precisely why incumbents value it.
The cost of entry
The OCC has indicated that minimum capital for a viable stablecoin trust business runs somewhere between roughly $6 million and $25 million, depending on the business model.
That range is low enough to permit serious new entrants and high enough to exclude the long tail of projects that characterized earlier phases of the industry. It is, in effect, a filter — which is what capital requirements are designed to be.
The conditions attached
"Conditional" is doing real work in these approvals. Charters typically come with requirements covering capital maintenance, liquidity, operational risk controls, business plan adherence and consent to enhanced supervision during an initial period.
Firms that treat the charter as a marketing asset rather than an operating constraint tend to discover the difference during their first examination.
What it means for banks
For traditional banks, the arrival of chartered stablecoin issuers is a competitive event. These institutions cannot lend against their reserves — the statute requires full backing — so they are not competing to make loans. They are competing for the balances that fund loans.
