Business 21 May 2018Gerald Fenech
Coinbase looking to apply for federal banking license: report
Cryptocurrency brokerage firm and exchange Coinbase has been meeting with U.S. regulators to discuss the possibility of acquiring a banking license, according to a Wall Street Journal report, quoting sources familiar with the matter.
Meetings have allegedly been going on since early 2018, according to the WSJ report. These have taken place with regulators at the U.S. Office of the Comptroller of the Currency (OCC) and the discussions focused around an application for a national banking charter that pre-empts state-level financial regulations. Coinbase has yet to comment on these alleged developments.
If Coinbase acquires a banking license, this would definitely expand the gamut of services that the San Francisco-based company could offer its customers and would also remove the need for it to team up with a banking partner that would be willing to work with a cryptocurrency trading firm. This issue has cropped up within several jurisdictions such as Malta, where banks have been reluctant to engage with cryptocurrency trading firms applying to open a bank account. Other large exchanges are also reportedly considering applying for a banking license themselves to avoid these obstacles which appear to be quite a hurdle for operations.
Acquiring a banking license would also assist Coinbase’s sales pitch to large institutions which it hopes to attract to its platforms. Coinbase has begun to roll out a considerable variety of products for those institutional investors, including innovative ones like cryptoasset custody. However, most of these institutions feel much more comfortable working with custody partners that have conventional banking systems—understandable in the rather risky environment that surrounds cryptocurrencies.
Aside from Coinbase, another cryptocurrency financial services startup called Ivy Koin also reported met up with officials at the Federal Deposit Insurance Corporation (FDIC) in the past weeks, according to the WSJ report. This meeting was publicly confirmed by ivyKoin President Gary Fan.
Still, there are several new regulations if a company wishes to open a banking institution that would probably offset the benefits of owning such a bank.
Speaking at an industry meeting last month, Comptroller of the Currency Joseph Otting pointed out that companies that have held meetings about the possibility of a banking license have second thoughts when faced with the onerous demands that this entails, saying:
“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. 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.”
Coinbase is only one of five firms which have received New York’s elusive BitLicense that is essential to conduct cryptocurrency trading in the state.
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