What is a Full Reserve Bank?
Full-reserve banking (also known as 100% reserve banking, narrow banking, or sovereign money system) is a system of banking where banks do not lend demand deposits and instead, only lend from time deposits. It differs from fractional-reserve banking, in which banks may lend funds on deposit, while fully reserved banks would be required to keep the full amount of each depositor’s funds in cash, ready for immediate withdrawal on demand.
Circle Regulation Commitment
The chief executive of USDC issuer Circle says that the company is committed to a path where they are regulated like a bank.
In a new interview with CNBC, Jeremy Allaire tells host Kate Rooney that Circle intends to become a crypto bank that would keep the full amount of each customer’s deposit on hand ready for withdrawals.
“We want to be a full reserve digital currency bank. We’d like a framework for that to exist. We’d like to apply for that license if such a license was available… We think the world needs a full reserve banking system. We think the world needs much safer base layer money and that’s what stablecoins represent. And so if that becomes something that say the Federal Reserve supervised, and we were sort of chartered and operated in that way and have the amount of supervision that goes with that, that’s absolutely something we will do.”
A full reserve banking system is an alternative to fractional reserve banking, which is the more common system where banks only keep a portion of depositor funds on hand.
International Demand Increasing
Allaire’s revelation of Circle’s long-term plan comes as the CEO says he’s witnessing demand for digital dollars around the globe soar.
“We’re absolutely seeing demand all around the world and this was actually something that started right around when the pandemic hit, which is also when USDC started to see a lot of growth, like really dramatic growth, and so the demand for digital dollars is highly global.
I met this morning with a company that is growing really fast, and they’re in Latin America. They were founded in Argentina. They have built products that help companies to move money within Latin America, within their own operations, and internationally and USDC is a core part of that, and that’s profound…
We have other companies that are in markets like Mexico where they’re doing over a billions dollars in remittance transactions using USDC between the US and Mexico faster [and] cheaper in an environment which has been predatory historically…
We see demand in Africa, in Asia, in a lot of parts of the world.”
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