Circle wants to complete the unfinished challenge of narrow banks? The institutional penetration war of US dollar stablecoins

(Written by Yu Zhe'an (Researcher) (For the full text, please visit Yu Zhe'an's Facebook page)｜Edited by ABMedia)

As the two narratives of "central bank digital currency" and "US dollar stablecoin" clash, what is really worth paying attention to is: who can touch the Federal Reserve's balance sheet? This article uses two seemingly unrelated but closely related events, TNB (The Narrow Bank) and Circle (USDC issuer), to show you how stablecoin issuers use "institutional choice" to launch a silent challenge to the current financial order.

TNB case: an unwritten institutional conflict

TNB was founded by James McAndrews , a former senior executive of the Federal Reserve Bank of New York, and claims to "only accept deposits, not lend, and not bear credit risk." This narrow bank began applying for a Federal Reserve master account in 2017, but eventually lost the lawsuit after six years and was officially rejected in 2023.

The reason for the Fed's refusal is not difficult to understand: if TNB is allowed to deposit and withdraw reserves and enjoy risk-free returns, it will create institutional arbitrage space for the traditional banking system. This will attract a large amount of funds from general banks to TNB, which "does not lend and has zero risk", causing market distortion and financial instability.

This is not a rejection of a bank, but a ban on a capital model.

Circle Operations: Seemingly Compliant, but Actually High-End Options Gambling

Unlike TNB's direct challenge, Circle adopted a strategy of "institutional penetration". They worked with BlackRock to establish a dedicated government-type money market fund (Reserve Fund) and tried to obtain the Federal Reserve's overnight reverse repurchase qualification (RRP). Although it was ultimately rejected, the intention and institutional value of this operation itself are intriguing.

( New York Fed changes RRP counterparty policy, Circle's reverse repo dream shattered )

Circle receives the following three levels of implicit capital dividends through this annual management fee of only 0.17%:

1. BlackRock’s asset management and brand endorsement

2. Obtaining an institutional ticket to the Fed's reverse repo market

3. Satisfy the basic conditions of RRP through SEC Rule 2a-7 qualification and gain access to the Federal Reserve's policy tools

The structure of this transaction is similar to a "zero-cost, deep out-of-the-money institutional option": failure will not harm the entity, and success will open up the possibility of connecting with the Federal Reserve's balance sheet, further consolidating USDC's position as the leading US dollar stablecoin.

Will the valuation basis of stablecoins shift from income to system?

From the USDC strategy, we can see that the competition in the stablecoin market is evolving from "interest rate differentials" to "institutional access rights". This is not simply financial innovation, but an institutional game around the Fed's policy tools and capital market design. When Circle and TNB touch the Fed's boundaries in different ways, the Fed's response strategy will also set a paradigm reference for global central banks and the stablecoin market.

In the future, stablecoins may no longer just be anchored to the US dollar, but the distance from the Federal Reserve’s “institutional choice” will become the core of their valuation.

Grant and Gary Cardone, two well-known American real estate and venture capital tycoons, discussed the housing market and asset allocation on the Bonnie Blockchain show on June 23. In particular, they strongly criticized the long-standing issue of "buying a house is an investment" and advocated for legislation to "prohibit calling buying a house an investment."

The brothers did not deny that they spent the first half of their lives renting houses, but became rich through leverage and Bitcoin (BTC) layout. They further revealed the secrets of the US housing market data, pointed out the distortion of current market interest rates and liquidity, and proposed a new asset allocation concept combining real estate and Bitcoin.

The family suffered a heavy blow in their childhood, and the two brothers realized that "buying a house is not an asset"

Grant recalled that when he was 10 years old, his father passed away suddenly. His mother immediately sold the house that his father had worked so hard to buy. He said:

"My mother should have been sad, but she was terrified because the house would only be a burden."

Gary said his mother compared prices everywhere to save money, but she was unable to make money and control the economy, which made them realize very early: "It's useless to maintain a house. Just owning a house will not make you rich."

Buying a house is the worst investment. If there is no cash flow, it will not be considered an investment.

As for whether buying a house is an investment, Grant directly criticized:

"Buying a house is absolutely the worst, worst, worst investment"

He believes that buying a house not only does not generate cash flow, it also lacks liquidity and will tie up one’s life. Grant also said that even if the house price rises three times, his partner will not say that he will make 300% profit by selling it. In other words, a house bought to live in will not be treated as an investment at all.

Gary also said that many Americans are tied to the ultra-low mortgage interest rate of 4%, and they dare not move away from their original cities even if there are better job opportunities. He laughed and said:

"This is just exchanging your life for a little interest rate discount, it's not worth it at all."

70% of Americans rely on low-interest mortgages to hold on to their homes

The brothers also revealed that currently 70% of homeowners in the United States have mortgage interest rates of less than 4%, and 30% of people buy houses directly with cash. If you buy a house now, you have to pay about 5% mortgage interest, but if you take the cash in your hand to the bank, you can only get 0.25% interest income.

The reason why house prices are holding up at present is that now 80% of the loan can be borrowed. If banks become conservative in the future and no longer provide such high-ratio loans, the overall house prices will plummet by 40%.

BTC does not need to pay taxes or use water and electricity, and the annual return may be as high as 15%.

Instead of being tied down by mortgage payments, the brothers recommend buying BTC. Gary joked:

“I’ve never received a call saying the Bitcoin roof was broken and I had to fix it.”

They said that the average annual return of real estate in the past 100 years was only 1%, which does not include invisible costs such as repairs, taxes, and relocation. They also believe that investing in Bitcoin is more efficient and does not require the costs just mentioned, and the average annual return may be 15%.

Grant added that BTC can be purchased regularly and in fixed amounts, without having to worry about the frequency of transactions and the timing of exiting. He also joked that his children have moved 17 times, and they are not afraid of embarrassment, but only care about "whether the pillow is soft enough."

If you want to invest in real estate, buy 20 or so houses and collect rent, then use the money to buy BTC

However, the brothers do not completely deny the investment value of real estate, but emphasize that self-occupied housing should not be regarded as an investment. Therefore, they advocate operating real estate commercially, such as buying more than 20 houses at a time to rent out, establish a stable cash flow, and then use it to buy BTC.

They are trying to create a "hybrid asset" model, combining real estate and Bitcoin as collateral assets to obtain more efficient leveraged loans.

Rental pressure in Taiwan's housing market will rise in 2025, and interest rates and loan restrictions will curb investment speculation

For Taiwanese people, the issue of "buying a house or renting a house" is also under continuous debate. At present, the overall housing market in Taiwan in 2025 is showing a trend of high-end consolidation, with house price increases slowing down and even a slight decline in some areas, but overall house prices remain at historical highs . In terms of rents, affected by rising house prices and interest rates, rents continue to rise , and the living pressure of renters increases.

According to the Ministry of the Interior's real estate information platform and statistics from several real estate brokers:

• Housing price trend : The overall trend is high-end consolidation, with slight declines in Taipei, New Taipei City, Taichung, and Kaohsiung, and a slight increase in Taoyuan due to construction and first-time homebuyer demand.

• Transaction volume : The number of buildings transferred for sale and pre-sale transactions in the six cities has declined significantly, indicating that market buying sentiment has cooled.

• Rent : Continuing to rise, the annual rent increase reached 2.5%, reflecting the strong demand for rental housing and the increased living pressure for renters.

• Housing loans and policies : Rising interest rates and strict loan restrictions have curbed speculation by investors, and the market is gradually dominated by owner-occupied demand.

• Economic environment : Robust economic growth provides some support for the housing market, but global and cross-strait uncertainties remain.