Crypto Firms Seek Banking Licenses Amid Regulatory Scrutiny

Four major cryptocurrency companies—Circle, BitGo, Coinbase, and Paxos—are reportedly planning to apply for banking licenses or similar authorizations. This strategic move aims to integrate digital assets more seamlessly with traditional financial systems. According to the report, Circle and BitGo are pursuing federal bank charters, which would enable them to offer conventional banking services such as deposit accounts and loans. This development underscores the growing trend among digital asset firms to seek regulatory approval and operate within the framework of traditional financial institutions.

Coinbase and Paxos are also exploring similar regulatory pathways, although the specifics of their applications have not been disclosed. The move by these companies comes as the regulatory landscape for cryptocurrencies continues to evolve, with increasing scrutiny from authorities. Anchorage Digital, which already holds a federal bank charter, serves as a precedent for these firms. However, Anchorage has faced regulatory challenges, including an order from the Office of the Comptroller of the Currency (OCC) in 2022 to enhance its controls around client due diligence and anti-money-laundering measures. This highlights the significant compliance hurdles that digital asset firms must navigate to obtain and maintain banking licenses.

Last week, the U.S. Department of Homeland Security’s El Dorado Task Force, which focuses on combating money laundering and other financial crimes, contacted Anchorage Digital Bank employees to inquire about the company’s practices and policies. The specific reason for this probe remains unclear, but it underscores the heightened regulatory scrutiny that crypto firms face. Anchorage CEO Nathan McCauley acknowledged the challenges of complying with federal regulations, stating that the “whole gamut of regulatory and compliance obligations that banks have can be intertwined with the crypto industry.”

The efforts by Circle, BitGo, Coinbase, and Paxos to obtain banking licenses reflect a broader trend in the cryptocurrency industry towards greater regulatory compliance and integration with traditional financial systems. By seeking federal bank charters, these companies aim to enhance their credibility and expand their service offerings, potentially attracting more mainstream users and investors. However, the path to obtaining these licenses is fraught with regulatory challenges, as evidenced by Anchorage’s experience. As the industry continues to evolve, it remains to be seen how these companies will navigate the complex regulatory landscape and achieve their goals.