The Goldman Sachs and Baidu backed cryptocurrency startup, Circle Internet Financial Ltd., one of the most valuable cryptocurrency startup is making a big move in the highly regulated banking and brokerage space. According to an interview with Bloomberg, its CEO Jeremy Allaire has revealed that they are seeking federal banking license and registering as a securities exchange.
In the interview, Mr Jeremy said that the process of obtaining the licenses has started and they are in talks with the Federal authorities. Circle is aiming to become the first cryptocurrency startup to receive such licensure at the federal level.
A banking license will allow Circle to be less dependent on traditional players and will be allowed to hold customer’s assets in form of digital tokens or fiat currencies like USD. It will also plug several components of the financial systems.
“To hold reserves with the Federal Reserve, to natively access the central-banking system without intermediaries, to directly settle with other banks in other markets around the world through those networks — that can improve the efficiency of what we deliver, it can reduce the costs,” Allaire said.
Allaire in the interview also stressed out on why Federal authorities should start looking to this matter seriously: “The regulators need to figure this out because eventually other banks that they regulate are going to want to hold crypto.” He added: “They’re going to need to have rules for this. We can be a great guinea pig.”
Under current regulations, cryptocurrency transactions in the US are primarily regulated at the state level as they are considered money transmitter businesses, forcing them to comply with 50 different set of state regulations and what Circle plans to bring it down to one.
“You’re able to have a single conversation,” said Robert Bench, Circle’s chief compliance officer. “It’s hard to have 50 conversations.”
Allaire said that Circle will initially pursue the licensed broker and trading venue with the SEC, before pursuing a banking license.
A Federal banking license will displace state-level regulations and will enable firms to operate under a single set of guidelines through the US. However, the banking license will also invite tough regulatory oversight, which many fintech startups prefer as it will have to deal with a single set of regulations rather patches of different regulations.
Coinbase, on the other hand, is also exploring the option of a banking licence with the regulator, according to two people familiar with the matter. Coinbase is also launching SEC approved crypto securities once the regulator greenlights the pending approval.