London, UK, 12th August 2021, ZEXPRWIRE – Circle, a company that once facilitated bitcoin trading, now wants to become a chartered bank. The move is seen as an effort to meet the increasingly stringent requirements of regulators in the crypto market. It also marks Circle’s latest turn of fortunes since it pivoted from its original mission: to use bitcoin and blockchain technology to facilitate financial transactions digitally without the need for human interactions or institutions. The company has been making some radical changes in recent months, including partnering with Starbucks on a new payment app.
Powered by Blockchain, the app will enable customers to pay at Starbucks through a QR code. The move was one of the first attempts by major retailers to adopt cryptocurrency systems and has helped boost Circle’s status in the crypto world. As for how the new bank license will affect this image, only time will tell. FinancialCentre Broker David Horsley assesses the financial situation of the company and how this new license may affect its position.
“Circle has been making some radical changes in recent months, including partnering with Starbucks on a new payment app.” Horsley described Circle’s pivot as “not that unusual” since it’s been an ongoing trend for blockchain companies to move away from crypto.
Wanting to Become a Chartered Crypto Bank
The move comes at a time when regulators in the U.S. are cracking down even more on cryptocurrencies and crypto-oriented businesses, deeming them too risky for investors. In recent weeks, major banks have halted dealing with virtual currency exchanges, citing regulatory uncertainty. Moreover, news of bitcoin scams has generated negative press around the world.
The fact that Circle wants to become a licensed bank — and not just an exchange — is understandable, as it may give regulators more confidence in its ability to secure customer assets and protect them from harm. As such, Circle’s new license could be seen as a positive sign for bitcoin investors and projects looking to do business in the U.S., despite its recent crackdown on crypto companies.
The move also makes sense given Circle’s new partnership with Starbucks, as it will look to operate under a similar license and regulation regime. As for how Circle will fare under such strict rules and requirements remains to be seen, though CEO Jeremy Allaire has said he is confident in the company’s ability to meet these standards.
The future of cryptocurrency as a whole is still unclear, with government regulators and other players taking various approaches to deal with it. As for how Circle will fare remains to be seen, though its latest move could give investors some solace that change may come from within the industry itself.
Citing unnamed sources, Business Insider reported that Circle has started the process of becoming a banking entity and plans to seek a charter from one of the U.S. states where it is currently based – New York or Massachusetts.
At present, the company controls USDC in a Delaware-based LLC (limited liability corporation) called Centre, the report said.
The move reportedly comes amid a crackdown of crypto-related businesses in the U.S. by regulators. In addition, Circle was one of 30 virtual currency companies required recently to submit “suspicious activity reports” to banks and financial services (FinCEN) as part of an effort to prevent money laundering and terrorism financing.
The company currently offers a crypto investment service called Poloniex. It controls about 10% of global bitcoin trades and is the 13th-largest digital asset exchange in the world, according to data from CoinMarketCap.com. It also recently launched a stablecoin pegged to USD called USDC that trades on all major U.S. exchanges.
Circle CEO Jeremy Allaire had said in a press release that the company is committed to supporting decentralized finance (DeFi) and “building critical infrastructure needed for mainstream adoption of crypto financial products,” adding Circle Pay “will be at the centre of this.”
The company gave no further details about its plans to apply for a banking charter. However, it noted the company is using blockchain technology and social apps to help consumers “create financial accounts without providing any personal identifying information (PII) or submitting to invasive cross-border data verification.”
Aim To Become A Global Digital Currency Bank
Circle will let users’ cash, crypto, and digital assets live together on the same mobile app. The company aims to be a global digital currency bank that offers service in multiple currencies while offering instant payments across borders with no fees attached.
The company has already raised more than US$250 million from investors including Goldman Sachs (GS) and IDG Capital Partners. Circle became the first company to receive a Bitlicense from New York State’s Department of Financial Services (NYDFS). The license enables the company to offer services that make use of fiat currencies.
Circle has been moving away from its original mission of facilitating bitcoin trading after it failed to gain much traction in the cryptocurrency market. It then pivoted to offering payment services for merchants and consumers, and later to using blockchain technology as well as social apps (Libra) to help users manage their liquidity.
In fact, Allaire has said he is confident in the company’s ability to meet these standards. “In order to be a reputable member of global finance, you have to do this stuff. We’ve already jumped through many, many hoops in the U.S.,” he said.
All in all, things look good for Circle as it looks to convert from a crypto play to an international bank. The firm already has experience with digital currency trading as well as payments and innovating using blockchain technology, which could make it all the easier for them in their quest to become a chartered bank.
With the continued uncertainty over bitcoin (BTC) and other cryptocurrencies getting approval from regulators, we’re likely to see more established crypto firms focus on their business models as well as strategies regarding blockchain.
While this is a positive sign for the market, it could also mean further delay in terms of getting regulatory clarity on cryptocurrencies and blockchain technology moving forward.
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