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Last week we touched on Gemini implementing USD pairings with major coins and how the Winklevoss twins are attempting to be the go-to option as an exchange. This week, rumors are buzzing about Coinbase inquiring about banking licenses. Reports from Wall Street Journal reveal that crypto operators met with US financial regulators to discuss the matter. An anonymous source told WSJ that the cryptocurrency operator had a meeting with regulators at the US Office of the Comptroller of the Currency (OCC) earlier this year to access the option of applying for a national banking charter. 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.
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 meeting with officials at the Federal Deposit Insurance Corporation (FDIC) in the past weeks, according to the WSJ report. This meeting was publicly confirmed by ivy Koin 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.
What are your thoughts on the matter? Is Coinbase pursuing banking licenses a smart move or is this a step towards centralization? Share this blog post and give us your opinion!
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