Circle is in Talks with U.S Regulators to be a Licensed Bank

Crypto firms want to be licensed banks

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Circle Internet Financial Limited which is one of the most valued cryptocurrency platforms in the world wants to venture into the United States banking sector and brokerages a sector which is highly regulated. Circle is partly backed and owned by Goldman Sachs and is now planning to seek a federal banking license in order to provide crypto banking services to its customers. More to that the venture wants to be registered as a brokerage in order to assist investors in the buying and selling tokens viewed as securities.

These plans were revealed by Circle leaders including their CEO Jeremy Allaire during an interview with Bloomberg. No digital currency company has obtained such status from regulators in the United States since the Crypto market is highly unregulated. Obtaining the banking license Circle would be subjected to continuous and tough scrutiny from the regulators.

According to Robert Bench who works as the Chief Compliance Officer at Circle:

“You can only have a single conversation because it’s very hard to have 50 conversations.”

Officials from Circle have said that they already had a conversation with officials from the office of the controller of the Currency in order to explore banking functions. More to that they also had conversations with officials from SEC and also officials from the Financial Industry Regulatory Authority which is responsible for overseeing brokerages. Circle intends to get SEC regulation before getting the banking license. SEC spokesperson, however, avoided the question about circle when contacted.

Circle wants to control its crypto assets to increase efficiency

Access and obtaining of a bank charter would be a big achievement by Circle since it would make the venture firm less depended on traditional lenders, therefore, having an opportunity to hold customer assets in digital coins or even in fiat money like the US dollars. Having a banking license would also give them a chance of pursuing other financial components.

According to Allaire:

“It would be very good to access the central banking system without having to go through intermediaries. This would increase our efficiency on the services we deliver while reducing costs.”

Cryptocurrency firms in the United States are now building a relationship with the government and regulatory bodies after staying outside the government for a long time. The young industry expects more influence in the drafting of rules which will govern the crypto industry.

Coinbase, the biggest crypto exchange in the United States has also joined the topic of applying for a banking license from the financial regulators according to sources with good knowledge about the whole issue. Officials from Coinbase are said to have had a discussion about the matter in January although the Spokesperson of Coinbase declined to comment about the matter.

Other banking regulators including Fed and Federal Deposit Insurance are said to have also been engaged by several cryptocurrency firms. One business payment system called Ivy Koin is said to have already met with regulators this year seeking guidance about compliance with rules.

The main reason why Circle contact OCC staff is to use their expertise in order to develop standards in order to tackle problems facing traditional financial institutions who handle cryptocurrencies. Wall Street firms like State Street Corp. have been providing custody services like holding securities for difference investment advisers. The banking industry has been struggling to hold cryptocurrencies because of their volatile nature.

Many investors and analysts believe that believe solving the problems surrounding the custody of digital assets would pave way for widespread investment of the digital currencies. They believe that crypto firms should be able to have custody of the assets but they must get federal licenses from the regulators.

Allaire concluded by stating that:

“This is one area where regulators should look into because eventually even banks which they regulate will want to hold cryptocurrencies. They should start drafting rules for this.”

For a long time, US bank regulators have not been associating themselves with cryptocurrencies. They have been watching the growth of the sector from a distance. In the meantime officials at market regulators like SEC and CFTC frequency quip in public appearances sating the amount of time, they have dedicated to checking policies about digital coins.

Concerns from SEC

SEC has been concerned by most of the coins sold by startups though ICOs since they are unregistered securities. According to SEC: “Our staff is concerned that many unregistered platforms having online platforms appear as SEC registered while they are not.” The agency is now asking every firm offering ICOs or digital coins to register before an action is taking which may attract heavy penalties.

On their part circle said that they wanted to become an ATS through either application or buying a platform which is already having such a status. Circle who already bought Poloneix Inc. this year delisted many tokens in order to conform to SEC rules. He concluded by stating that: “We are making legal determinations on the tokens to retain and the ones to delist according to SEC guidance.”

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