Crypto giants Circle and Coinbase are racing to join the banking establishment they once sought to disrupt. The irony isn’t lost on anyone. These digital revolutionaries now want traditional bank charters, complete with all the bureaucratic red tape they previously scorned.
But after the crypto carnage of 2023 – goodbye FTX, Silvergate, and Signature Bank – they’ve realized playing nice with regulators isn’t such a bad idea after all.
The motivation is crystal clear. A bank charter means direct Federal Reserve access and possibly FDIC insurance for customer deposits. It’s like getting the ultimate seal of approval in the financial world.
Plus, they’d be able to handle deposits, manage stablecoin reserves, and issue loans without relying on third-party banks. No more awkward middleman relationships. Both companies already manage stablecoins that maintain stable value by backing their digital tokens with real dollars.
The timing isn’t random. Federal regulators have been beating the drum for stablecoins to have proper legal foundations, similar to banks or money market funds. Coinbase could potentially become the 21st largest bank in America based on consumer funds managed.
Circle and Coinbase are fundamentally saying, “Fine, we’ll play by your rules.” Smart move, considering it could help them shape upcoming regulations from the inside.
Sure, getting a bank charter is expensive – just ask Anchorage Digital, who burned through tens of millions trying. With Paul S. Atkins now leading the SEC, the path to regulatory approval might become clearer.
And federal regulators are watching crypto firms like hawks after last year’s meltdowns.
But the potential payoff is massive. We’re talking about positioning themselves among the largest U.S. financial institutions by assets managed.
The strategy goes beyond mere compliance. These companies are eyeing broader financial ecosystems, complete with payment network integrations and institutional partnerships.
Circle’s pushing for a stablecoin orchestration network, while both firms want to attract traditional finance clients who wouldn’t touch pure crypto platforms with a ten-foot pole.
It’s a calculated gamble. The intense regulatory scrutiny and compliance costs might make some crypto purists cringe.
But in a post-FTX world, being boring and regulated might just be the smartest play in the game.
