News reports indicate Cryotocurrency unicorn Circle is seeking to secure a federal banking license and registering as a securities exchange. This is no doubt an audacious move which is set to be the first of its kind.


Circle`s plans were disclosed by its CEO, Jeremy Allaire during a recent interview with Bloomberg. He was upbeat about the company`s prospects of possibly becoming the first cryptocurrency start-up to secure a banking license at the federal level. Registering as a banking institution would allow Circle to hold assets at the Federal Reserve.


Allaire is quoted as saying: “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” (Source:


Allaire further stated: “The regulators need to figure this out because eventually other banks that they regulate are going to want to hold crypto. They’re going to need to have rules for this. We can be a great guinea pig” (Source:


Currently, all cryptocurrency companies in the US are regulated at the State level as money transfer/transmitter businesses, a status that requires full compliance with as many as 50 different sets of regulations emanating from the 50 States. This deters many of such companies from operating in some States, thus restricting them to doing business in only a couple of States.


Circle operates both an over-the-counter (OTC) cryptocurrency trading desk and a cryptocurrency investing app aimed at reaching retail investors. The company has made significant strides; it recently concluded a $110 million funding round which resulted in substantial increases in its valuation to $3 billion.

Obtaining federal licenses come with a myriad of benefits; benefits that would accrue to Circle should it eventually receive the banking license. Some of these benefits include the opportunity to conduct business throughout the US under a single set of guidelines. Yet another benefit would be that Circle will be required to provide FDIC-insured accounts to clients directly without the need for a third party such as a banking partner.


The benefits come with some responsibilities. Companies that work under US federal banking license are required to abide by some specified regulations. Federal regulators are typically strict on enforcing these regulations and where companies default, penalties are handed down.


It is because of the strict supervision and enforcement of regulations at the Federal level that many Fintechs prefer to remain under state regulatory supervision. During an industry conference earlier this year, Controller of Currency, Joseph Otting reported re-enforced this point when he stated: “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.”


These glaring challenges notwithstanding, the company (Circle) sees beyond the challenges, maintaining focus on the benefits. It maintains the conviction that it is well able to comply with federal regulations and rack in huge gains in the long-run as a consequence.

Image source: bitcoin, ethereum

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