Cryptocurrency giant Circle is holding discussions with US regulators regarding seeking a federal banking license and registering as a securities exchange.
Jeremy Allaire Circle CEO confirmed the company’s intention to become the first cryptocurrency startup to acquire such licensure at the federal level.
“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.
“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.”
Currently, firms that deal cryptocurrency transactions in the US are solely regulated at the state level as money transmitter businesses, limiting them to abide by 50 various sets of regulations and usually stopping them from dealing in many states.
This includes the Goldman Sachs- backed Circle, which deals in over-the-counter (OTC) cryptocurrency trading deal, including a cryptocurrency investing app aimed at retail investors. Recently, the company ended a $110 million funding round, increasing its valuation to $3 billion.
Federal banking licenses prevent state-level banking regulations, allowing firms that have them to deal throughout the US under a single set of deadlines.
Yet, national banking charters also subject migrants to much more regulatory oversight, which is the reason many fintech startups prefer to operate with the patchwork of state-levels after having the knowledge about the difficult process to register at the federal level.
“Most fintechs come to us because they have heard of this thing called a national banking charter that gives them pre-emption across state lines,” Comptroller of the Currency Joseph Otting reportedly said at an industry conference earlier this year. “When they come and they speak to us, and they understand what it really takes to be a bank, they kind of glaze over and often leave skid marks leaving the building.”
Yet, Circle with the opinion that it’s worth the effort as a result of the long-term gains.
“You’re able to have a single conversation,” said Robert Bench, Circle’s chief compliance officer. “It’s hard to have 50 conversations.”