Circle Internet Financial Ltd., one of the world’s most valuable cryptocurrency platforms, is looking to make a big leap into the highly regulated realm of U.S. banks and brokerages.
The venture, partly backed by Goldman Sachs Group Inc., plans to seek a federal banking license to provide more services to customers. It also intends to pursue registration as a brokerage and trading venue with the Securities and Exchange Commission, so it can help investors buy and sell tokens deemed to be securities.
Circle leaders including Chief Executive Officer Jeremy Allaire laid out those aspirations in an interview with Bloomberg. It’s uncharted territory: No venture that began in the largely unchecked world of digital currencies has obtained such status with U.S. regulators. While getting a banking license would subject it to tough scrutiny, the move would winnow the field of regulators Circle must appease because federal laws would pre-empt a patchwork of state rules covering crypto.
“You’re able to have a single conversation,” said Robert Bench, Circle’s chief compliance officer. “It’s hard to have 50 conversations.”
Circle officials say they’ve had preliminary conversations with the Office of the Comptroller of the Currency to explore banking functions, as well as with staff at the SEC and officials from the Financial Industry Regulatory Authority, which oversees brokerages. The firm is likely to pursue SEC regulation before the banking license. The OCC and Finra declined to comment. SEC spokesmen didn’t respond to requests for comment.
A bank charter would make Circle less dependent on traditional lenders, potentially letting it hold customer assets in the form of digital coins or government-issued currencies such as U.S. dollars. It could also plug into other components of the financial system.
“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.
Goldman Sachs co-led a funding round for Circle in 2015, granting the startup the imprimatur of one of Wall Street’s most prominent firms. Another round in May gave the venture a roughly $3 billion valuation. Circle is now at the forefront as crypto firms build relationships with U.S. regulators, potentially exerting more influence over the drafting of rules for the young industry.
Coinbase, one of the nation’s largest crypto trading platforms, has also broached the topic of a potential banking license with regulators, according to two people with knowledge of the matter. In January, company officials met with the OCC’s chief innovation officer, Beth Knickerbocker, according to calendar entries obtained by Bloomberg under the Freedom of Information Act. A charter was among topics raised, one person said. Elliott Suthers, a spokesman for Coinbase, declined to comment.