Crypto giant Circle has announced its intention to become a bank, fully regulated by the Federal Reserve, the Office of the Comptroller of the Currency and the FDIC.

Why it matters: We’re still a very long way from this happening. But if it does, Circle’s USDC stablecoin could become a de facto central bank digital currency.

How it works: Circle’s dream is to become a narrow bank — one that eschews fractional-reserve banking entirely, and instead places all deposits on reserve at the central bank.

  • Only banks can open accounts directly at the central bank, which credits them with pure money.
  • In Circle’s case, the “depositors” would be holders of USDC, and the collateral backing up USDC would be the money on deposit at the Fed. Circle would pocket for itself the interest that the Fed pays on bank reserves.



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