FairX had hoped to be something desperately needed in the cryptocurrency industry — a bank serving the digital asset community. However, after spending over a year trying to launch, it has been forced to shutter its doors and turn off the lights as it wasn’t able to receive the funding it needed to be classified by the U.S. Federal Deposit Insurance Corporation (FDIC) as a financial institution.
Across a series of tweets, the company asserted, “Let me start right off the bat by telling you our original goals of creating a licensed national bank is unfortunately failing. The immediate reason is simply a lack of funding — for the past 14 months we’ve been on a tear trying to raise money. Ultimately, our business model was simple: introduce a new, licensed, fully regulated national bank, modeled as a financial market utility, that would work with individuals and banks to create a dematerialized bank deposit, denominated in USD. The bank was Frank Financial.”
The tweets continue, explaining how the business model would have allowed for deposits to, in essence, be similar to stablecoins, but that it would also be everything a stablecoin isn’t. FairX asserts that stablecoins cannot be used to settle transactions between banks as they pertain to credit card or automated clearing house transactions, which is a limitation the bank hoped to overcome.
FairX had already set up new know-your-customer (KYC), anti-money-laundering (AML) and counter-terrorism policies that were in accordance with regulatory guidelines and had received positive responses from regulators for its efforts, according to the company’s tweets. However, the firm needed to gather additional funds to take the business to the next level, but ran into difficulty as investors began to view the platform as being too centralized.
The company is most likely going to head in a completely different direction now that it has been forced to close. It adds in a separate tweet, “For now, taking a step back to reflect is appropriate. There are some ideas for open sourcing some work we did unrelated to the bank that I think might be kinda neat. It’s around secure messaging and identity, and I’ll be opening up those repositories soon.”
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