The benefit of regulating Fintech and Bitcoin is how it would give both industries a more legitimate appeal. Far too often, media outlets and consumers see Bitcoin as a Wild West in the financial sector. But while it’s theoretically impossible to control Bitcoin due its decentralized nature, Circle feels additional regulation would be a positive thing for business.
Why Circle Wants More Regulation
The company argues that more regulation in Fintech and Bitcoin would make it easier to conduct business. To put this into perspective, Circle tried to find a charter from a federal banking regulator at the end of 2015. Albeit this would subject the enterprise to additional scrutiny, it would also allow for smoother business operations in the US. Obtaining a federal banking license would reduce the costs and complexity as part of working with third parties.
Contrary to what most people would have expected, the national-banking regulator told Circle they would “weigh its request”. This is quite surprising, considering how banks and regulators usually frown upon Bitcoin, rather than keeping an open mind toward the situation.
But there is another side to this medallion, as most companies in the Fintech sector are not actively pursuing a banking license. Instead, they see the industry as a way to do business traditional banks don’t pursue. In the case of Bitcoin, which cannot be controlled by banks, that caused to bank accounts getting shut down in the past.
It has to be said, though, how Circle is on an aggressive campaign to obtain the necessary licenses for their business. Not just in the United States either, as the company recently expanded its offering to the United Kingdom after receiving regulatory approval. They were also the first company to obtain a BitLicense in the state of New York in 2015.
Circle CEO Jeremy Allaire told the media:
Circle plans to pursue digital financial services beyond payments in the future, such as lending or investing advice. We think the fintech industry could benefit from different forms of national charters for online banking activities. Europe and China already have national or cross-border licenses for non depository electronic money-transfer services.
Obtaining a federal charter may not work for every company in the Fintech and Bitcoin space, though. Close regulatory scrutiny of the business plan, combined with compliance requirements with federal banking laws present new types of challenges. At the same time, it would let startups collect government-insured deposits [assuming they get approval to do so].
Regulating That What Can’t Be Controlled
Circle being in favor of more regulation, could have a hidden meaning as well. It is possible the company wants to eliminate as much of the competition in the nascent industry. Keeping in mind how this company is funded by Goldman Sachs, they have a valuable ally in their corner, giving them an edge over other Bitcoin companies. Thus, it is no surprise that they’re one of very few companies legally operating in New York state right now.
But if there is one thing history has taught us, it is that regulation is not always the solution. Despite efforts by regulators and policymakers, they will never be able to control Bitcoin itself. All they can do is scrutinize the companies dealing with cryptocurrencies, such as exchanges, wallet providers, and debit card issuers.
If the exodus of Bitcoin startups from New York State to less regulated jurisdictions has taught us anything it is that the Bitcoin industry prefers unregulated environments. Moreover, Bitcoin companies have shown to step in where traditional providers fail to serve the unbanked.