Coinbase Met with Regulators to Discuss Banking License

The cryptocurrency industry and the mainstream financial system haven’t been the best of friends over the years, but according to a Wall Street Journal report, Coinbase may be on its way to merging the two. The San Francisco-based crypto platform is reported to have held talks with banking industry regulators about a possible entrance into the mainstream financial services industry, a move that would allow Coinbase to diversify its product offerings and steer clear of the murky state of regulation in the crypto industry.

The Benefits And The Costs

Quoting a source familiar with the matter, the WSJ reported on May 18 that Coinbase had met with officials from the Office of the Comptroller of the Currency (OCC) earlier this year. The OCC is an independent department of the US Department of the Treasury which regulates national banks. It is charged with safeguarding the soundness of the national banking system.

The discussion centered around the possibility of Coinbase acquiring a banking license and its implications for the company, but other issues were discussed too. While crypto exchanges have faced much scrutiny from the SEC, the CFTC and other regulators, Coinbase would be under even more scrutiny if it acquired a banking charter. That’s because the charter would put Coinbase squarely in the crosshairs of a single regulator.

The charter would also enable the company to diversify its products and bypass all its bank partnerships, serving customers directly instead. The benefits would also include the ability to welcome institutional investors such as hedge funds, which could invest huge amounts of money and push the platform miles ahead of its competitors. This would align with its recent announcement regarding the launch of a suite of products that target institutional investors. These products, which include Coinbase Custody and Coinbase Markets, are offered in partnership with an “SEC-regulated broker-dealer.”

Not everything would be rosy for Coinbase, however, as a banking charter would subject the company to tougher regulations and a whole new set of rules. The company might have to do a complete overhaul of its business model, bring in new people, and apply more stringent measures going forward.

Coinbase Is Not Alone

Coinbase hasn’t been the only crypto-related business to have held meetings regarding acquiring a banking license. Ivy Koins LLC, a payments platform that deals in both fiat and digital currencies, has also held talks with regulators, according to the WSJ. Ivy Koins has been working with banks and other financial institutions yet, according to its president, has no immediate intention of applying for a banking license.

Ivy Koins describes its meetings with regulators as pleasant and informative, and encourages other crypto-based startups to do the same. The meeting covered the startup’s business model, the risks and challenges ahead, and how best to steer clear of trouble.

Coinbase has not confirmed the meeting or divulged any further information. A spokesperson for the company said the firm is committed to cooperating with state and federal regulators to ensure the site is properly licensed to perform the services it offers. The OCC declined to comment on the same.

Coinbase has taken aggressive measures in the recent past to compete with other elite platforms. With many people regarding it as ‘the beginner’s exchange’, it has sought to upgrade its image by launching products that target institutional investors such as block trading. It has also announced an expansion plan that will see it open an operation in Chicago to take advantage of growing crypto interest in the city which hosts both CME Group and Cboe Global Markets.