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Circle Attempting US Banking License

Cryptocurrency exchange Circle is seeking a banking license from the federal government of the United States. If successful, this would be the first cryptocurrency exchange that becomes an official bank in the United States, which would be a major milestone for the cryptocurrency world.

Becoming a bank would give Circle some important benefits, such as being able to access the central banking system without intermediaries which would allow Circle to settle with other banks in different markets around the world. Also, Circle would be able to store money in the Federal Reserve, as well as take loans at the extremely low inter-bank federal funds rate of 1.75%, freeing Circle from dealing with higher-cost lenders. These benefits would improve the efficiency and reduce the cost of Circle’s services.

Becoming an official bank would also simplify Circle’s regulation process. Cryptocurrency exchanges are regulated differently in each state, but if Circle would become an official federally-recognized bank, it would only have to answer to the federal government. As Circle’s chief compliance officer Robert Bench says, instead of “50 conversations”, Circle would only have to be involved in one conversation.

Additionally, Circle is trying to register itself as a brokerage and trading venue with the Securities and Exchange Commission (SEC). This would give Circle the proper licensing to facilitate trading of digital assets considered to be securities. This is crucial since Circle acquired Poloniex for USD 400 million in February 2018, where there are dozens of cryptocurrencies being traded, some of which could be considered securities. Already, many cryptocurrencies have been delisted from Poloniex following Circle’s acquisition to avoid SEC backlash.

Circle has an OTC trading service that transacts USD 2 billion of cryptocurrency every month, as well as an investing platform where users can put money into various cryptocurrencies but not withdraw the cryptocurrency. Circle also has a pay service where users can send money instantly to people in 29 countries with USD, GBP, and EUR. Deposits held with this service are FDIC ensured up to USD 250,000, like all banks in the United States.

It is only natural that a service like Circle which deals with so many financial transactions and deposits would consider becoming a bank. Only time will tell if the US government will let a firm so heavily involved with cryptocurrency to achieve this.

 

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Digital US Dollar Launched by Goldman Sachs-Backed Startup

A new cryptocurrency by fintech startup Circle, a company backed by Wall Street giant Goldman Sachs, is aiming to be a digital version of the US dollar, writes the Independent.

Circle has announced that the new USD Coin will be free from volatility issues due to it being pegged to US dollar, offering it a stable value in order for it to be used as a working currency, rather than just an investment tool, the company says. Circle also claim it will be a faster and more secure version of the US dollar.

The underlying technology behind the proposed USD Coin will not be decentralized peer to peer, as it’s backed by fiat currency and released by a major financial institution, although it will be an electronic cash system, according to the company.  People will also not be able to mine the USD Coin in the same way other cryptocurrencies can be generated, as the only way to acquire them is to buy them.

It is the second cryptocurrency-related announcement from Goldman Sachs in the space of a month, following news that the bank had plans to open its own crypto trading desk on behalf of its clients. The startup clearly views the backing of Sachs as a huge driver of the project, commenting on its blog post:

“Existing fiat-backed approaches have lacked financial and operational transparency, have operated in unregulated jurisdictions with unknown banking and audit partners, and have been built as closed-loop ecosystems and closed proprietary technologies.”

Matthew Newton, analyst at crypto retailer eToro, sees the move as inevitable, suggesting that this has been coming:

“This shouldn’t come as a huge surprise to anyone who has been paying attention to cryptocurrencies over the last 18 months. Any forward-looking financial institution needs to understand this technology and accept its enormous potential.”

Newton goes on to argue that big banks have been investing in research and development of blockchain and cryptocurrency for some time. The trading platform will be the first of any major Wall Street institution and is expected to add further legitimacy, particularly following so close after Goldman Sach’s Bitcoin futures announcement last month.

There is a suggestion that the company may announce cryptocurrencies tied to other traditional currencies in the future, such as the pound and the euro.

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Circle Invest Adds Monero Functionality

Investing app Circle Invest has announced that it is adding Monero (XMR) to its list of supported cryptocurrencies. Currently, it includes functionality for Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), Ethereum Classic (ETC), Litecoin (LTC), and Zcash (ZEC). Circle allows for instant buying and selling directly connected to user bank accounts.

Monero has a market cap of USD 3.75 billion as of this writing, and is unique from Bitcoin in that it uses the CryptoNote protocol, which obfuscates sender, recipient, and transaction amounts. This makes Monero virtually untraceable, and is a preferred cryptocurrency when anonymity is the priority.

Circle was founded in 2013 and since that time has become one of the most popular places to buy and sell cryptocurrency. The company trades over USD 2 billion of cryptocurrency per month, providing excellent liquidity for traders and investors. Circle Invest doesn’t charge any commissions on investments, making it much more attractive than investing in stocks which almost always requires paying a broker commission. There is a 1.5-2% spread between buy and sell prices on Circle Invest, which is how it makes money, but such a spread is completely normal for a cryptocurrency exchange.

A caveat of Circle Invest is that users can’t withdraw their coins into personal wallets. Instead, they must keep coins in the Circle Invest wallet, and as cryptocurrency prices fluctuate their USD equivalent balance changes. The user can sell their coins at any time for USD which is directly deposited into their bank.

Generally, it is best to move coins into a personal wallet when investing in cryptocurrency, to ensure that coins are fully in possession and secure. However, this makes selling much slower than when using Circle Invest as it takes times to send cryptocurrency from its wallet to an exchange. Also, when buying cryptocurrency from an exchange that allows users to withdraw coins, it generally costs at least 5% of fees, on top of the spread between buy and sell prices, resulting in significantly more costs than when using Circle Invest.

Circle Invest is expected to add even more cryptocurrencies and digital assets in the future in its quest to become the top cryptocurrency investment platform.

 

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Image source: https://www.flickr.com/photos/159526894@N02/41806741152/ – descryptive.com

 

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