Circle seeks to launch national trust bank amid JPMorgan's bearish price target

• Circle has applied to launch a national trust bank, the First National Digital Currency Bank, N.A., in the US.
• The move comes amid JPMorgan's prediction that Circle's stock could hit $80, a 55% drop from its current price.
• CRCL closed at $181 on Monday, down 39% from its all-time high of $298.

Circle (CRCL) closed at $181 on Monday following an announcement that it plans to launch a national trust bank, the First National Digital Currency Bank, N.A. Meanwhile, JPMorgan hinted at a potential 55% plunge to $80 in CRCL's price.

Circle files to establish trust amid JPMorgan's bearish estimate

Stablecoin USDC issuer Circle applied with the Office of the Comptroller of the Currency (OCC) to establish a national trust bank in the US, dubbed the First National Digital Currency Bank, according to a press release on Monday.

The license would allow Circle to custody its USDC reserves by itself. The bank will also be authorized to custody digital assets for institutional clients. Circle's trust will differ from conventional banks as the license will prevent the charter from accepting traditional cash deposits or issuing customer loans. 

"By applying for a national trust charter, Circle is taking proactive steps to further strengthen our USDC infrastructure," CEO Jeremy Allaire said in the press release.

The firm shared that its pursuit of a federally regulated trust charter is an effort to align with the upcoming compliance standards outlined in the GENIUS Act.

Circle is not the only firm that has applied for a national bank charter. Other companies, such as asset manager Fidelity, have also applied to establish their own bank trusts. Anchorage Digital was the first to receive such a license from the OCC in 2021.

Circle's announcement comes amid JPMorgan's bearish projection for CRCL's price. JPMorgan rated the the company's shares with an "underweight" rating in its first coverage in the North American Equity Research, predicting that CRCL could hit a low of $80 — a 55% decline from its current price of $181.

The forecast is based on a 45x multiple applied to its 2027 projected earnings per share (EPS) of $1.56 in addition to a $10 premium based on strong interest in stablecoins.

"We are witnessing the launch of tokenized deposit accounts, digital money market funds, and a host of new entrants looking to enter into the digital dollar market," wrote JPMorgan analysts led by Kenneth Worthington.

After Circle's stock price skyrocketed over 800% following its initial public offering (IPO), several companies including Fiserv, Amazon, Walmart and, more recently, Mastercard have shown interest in launching their own stablecoins. JPMorgan suggested that some of these companies could compete with Circle's USDC stablecoin for market share.

"The risk is that a few will succeed in taking enough share to reach critical mass in a business with low switching costs, allowing them to leverage the network built by Circle," they added.

The analysts also highlighted that potential central bank digital currencies (CBDCs) adoption, particularly in Europe could hamper the company's growth prospects on the global stage.

Analytics platform Coinmetrics analysts highlighted a similar sentiment last week, suggesting that Circle may be exposed to critical challenges such as rising competition from other compliant stablecoin providers and due to its low portion of the USDC reserve revenue. They also suggested that the company's business structure could also affect its growth, as Circle is largely dependent on reserve-based income.

CRCL closed at $181 on Monday, representing a 39% decline from its all-time high of $298 last week. CRCL also witnessed its highest close last week, above $260, before slumping below $200.