Coinbase Eyes Banking License to Expand Beyond Crypto Trading — Report

The crypto exchange has met with US financial regulators to discuss applying for a banking charter, insiders told the WSJ

by Deyana Laguna
21 May • 2.5 min
In News

San Francisco-based cryptocurrency exchange Coinbase is exploring the possibility of obtaining a banking license as a way to broaden its product line and customer base, the Wall Street Journal reported on Friday, citing an anonymous source familiar with the matter.

Coinbase, which operates the largest US virtual currency exchange by trading volume, reportedly met with regulators at the US Office of the Comptroller of the Currency (OCC) in early 2018 to discuss its business model and possible application for a national banking charter.

The WSJ report also states that cryptocurrency financial services startup IvyKoin is also considering joining the US banking sector, revealing that the company has recently held talks with officials at the Federal Deposit Insurance Corporation (FDIC). IvyKoin President Gary Fan has publicly confirmed the meeting, without elaborating on the matter.

Broader Range of Services at Cost of Tougher Regulations

A federal banking license would allow Coinbase to offer its own custody and payment services using an OCC limited-purpose charter. The move would help the company attract more institutional customers — an aim which was stated last week when Coinbase announced a new range of products, including custody services through an SEC-regulated brokerage.

secflag

“We think this can unlock USD 10 billion of institutional investor money sitting on the sideline,” Adam White, vice president and general manager at Coinbase said in a blog post last Tuesday.

Obtaining a banking license would also allow Coinbase to deal with only one federal regulator, as opposed to a multitude of state ones, as well as offer users federally insured bank accounts. However, a banking license would also subject the company to new, tougher regulations.

“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,” OCC head Joseph Otting said at an industry meeting last month, as quoted by the WSJ. “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 one of only five firms that have received New York’s BitLicense, which is required to facilitate cryptocurrency trading in the highly-regulated state. Last month, the WSJ reported that the exchange was also looking into registering as a licensed brokerage firm and electronic-trading venue with the US Securities and Exchange Commission (SEC).

Coinbase offers Bitcoin (BTC), Bitcoin Cash (BCH), Litecoin (LTC) and Ethereum (ETH) for intra-virtual currency trading and for fiat money (USD, EUR and GBP). Launched in 2012, the exchange has around USD 20 billion in assets stored and more than 20 million users. It reported USD 1 billion in revenue last year and attracted USD 225 million funding from investors, including the venture capital fund of Netscape founder Andreessen Horowitz.