Circle courts regulators over banking and trading plans

Goldman Sachs-backed payments/trading/exchange network, Circle, is moving towards operating as a bank. 

Circle Internet Financial Ltd., is saying it has met with regulators with a view to moving its payments system – as well as its OTC and exchange-based trading concerns (it recently bought Poloniex) – into the highly policed realms of U.S. banks and brokerages. The high-profile business, backed up with cash from Goldman Sachs and others, is working towards a federal banking license and a significant expansion of its services, according to Bloomberg. It also, the report asserts, on the path towards SEC registration as a brokerage, which would ultimately allow the exchange’s US customers to trade in ICOs that the Securities and Exchange Commission have said should be policed by the same rules of as stocks and bonds.

In an interview with the news service, Circle CEO Jeremy Allaire was upfront about his company’s pioneering trajectory, which would make it one of the first – if not the first – venture to ‘go legit’ from the world of cryptocurrency trading. Though, as we have reported, other concerns have the similar goals firmly in their sights. Achieving a full banking license would, Bloomberg asserts, be a tough ask – but would allow Circle to circumvent the patchwork of state-specific crypto rules in favour of Federal rules.

As the firm’s chief compliance officer Robert Bench puts it, it means the firm only has to “have a single single conversation,” because “It’s hard to have 50 conversations.”

That single conversation has, so far, actually been two. Firstly with the Office of the Comptroller of the Currency at the US Treasury with regards to banking, the SEC for trading, and the Financial Industry Regulatory Authority regarding brokerages. Bloomberg reckons the SEC license will come first – though it is clear that the big prize would be the banking license, which would let it hold customer assets, be they crypto or cash deposits.

“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.

Circle recently teamed up with Bitcoin mining company Bitmain, to create its own a fiat-based cryptocurrency that could be used as part of its payments system.  The concept, which falls into the growing category of ‘Safecoin‘ proposals for creating stable cryptocurrency, will apparently be a reality by the summer of this year. The new tokens will be Ethereum-based, and called US Dollar Coins, or USDC – mirroring the currently available USDT coin overseen by Tether, that claims to peg its value 1:1 with the Dollar (though this is currently unverified). Circle says every USDC will be matched by a dollar bank deposit in an audited account, redeemable by verified buyers, removing the doubt and rumours that have, err… ‘circled’ USDT.

USDC will be included in Circle Pay, the company’s headline app, as well as in its Circle Trade market-making platform. It will also be listed on the Poloniex exchange.