What happens to be the whole ecosystem’s pain point can be the pleasure center for few. At least that’s the impression Bitcoin Industry has of Circle, the payments company which started off as just another Bitcoin product. Circle has recently called for broader regulations for the Bitcoin and digital currency sector.
While there are speculations that Circle’s proposal is driven by the company’s recent attempts to partner with mainstream financial institutions with a great deal of success. The company has probably become the first one in the digital currency sector to openly seek a charter from the federal banking regulator. Circle recently stated that the introduction of licensing for the new age fintech companies will make it easier to operate on a national scale without having to worry about different regulatory regimes introduced by various states.
Regulations can be Bad
A licensing regime for digital currency and fintech companies on a federal level will invariably increase the regulatory oversight. Companies will have to adhere to strict licensing laws that will include the introduction of AML and KYC regulations, fraud and suspicious activity reporting and other paperwork. However, it will eliminate various uncertainties currently faced by Bitcoin and digital currency companies. However, these very things may not prove to be either feasible or affordable to many startups in the sector. It is to be remembered that the digital currency technology is still in its nascent stages and a large percentage of companies operating in this segment are new as well. Except for a handful of investor-backed companies, none of these startups have deep pockets to meet all the compliance requirements in case regulations are introduced.
In Circle’s defense, implementation of regulations at the federal level will prevent the New York’s BitLicense fiasco from happening again. Soon after BitLicense was introduced by the then Superintendent of the New York State Department of Financial Services, Benjamin Lawsky many Bitcoin companies moved out of the state. The companies did not want to comply with regulatory requirements which would have proven to be detrimental to their whole business model and continuing operations without BitLicense would have made it illegal.
“We think the Fintech industry could benefit from different forms of national charters for online banking activities.”
A Fintech charter by the federal regulator will not only make it easier for Circle to operate across the United States, but it will also help in the company’s expansion plans. It is worth noting that Circle recently became the first company to partner with Barclays to use their systems to make transactions between the United States and the United Kingdom over blockchain.
While Circle’s request is being considered by the authorities, it is to be seen whether the concerned regulatory body will decide to consider it as a one-off case or introduce broad regulations.