Crypto firms are seeking federal oversight to streamline operations.
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In a strategic move to broaden its operational capabilities, Coinbase has applied for a national trust charter with the U.S. Office of the Comptroller of the Currency (OCC). This application could place the cryptocurrency exchange under federal regulatory oversight if approved, allowing it to provide expanded services that currently require state-by-state approval. Coinbase, a prominent player in the crypto sector, views this as a step to solidify its commitment to innovation while ensuring regulatory compliance across the United States.
ContentsWhat Could the Charter Mean for Coinbase?Why Are Other Companies Following Suit? What Could the Charter Mean for Coinbase?
The possibility of receiving a federal trust charter presents Coinbase with the opportunity to innovate within a more unified framework, bypassing current restrictions stemming from varied state regulations. The charter would enable the company to expand its custody business to encompass services like payments and settlement, which would be integrated without transitioning into a traditional banking institution. Greg Tusar, the vice president of institutional product at Coinbase, emphasized that the company is not aiming to evolve into a bank.
“Coinbase has no intention of becoming a bank,” Tusar stated in a company blog post.
Why Are Other Companies Following Suit?
Coinbase’s application aligns with a trend where major crypto firms are seeking federal trust charters. Competitors such as Circle, Ripple $3, and Paxos have pursued similar paths, indicating a collective shift within the industry towards federal oversight. This approach mitigates the need for individual state licenses, thereby streamlining operational processes for cryptocurrency companies. Such moves demonstrate the sector’s efforts to navigate the increasingly complex regulatory landscape of cryptocurrencies.
Currently, Coinbase operates its primary regulated custody service through Coinbase Custody Trust Company (CCTC). The New York state BitLicense regime, implemented in 2015, governs this framework, which was among the first state-level regulations for cryptocurrency in the U.S. Despite this, a federal charter is perceived as preferable for firms looking to implement services like crypto payments on a broader scale without isolated approvals for each state.
“It is our firm belief that clear rules and the trust of our regulators and customers enable Coinbase to confidently innovate while ensuring proper oversight and security,” explained Tusar.
The potential shift to federal oversight also reflects the industry’s ongoing adaptation to maintain compliance and legitimacy in the eyes of regulators and consumers alike. As federal guidance evolves, firms are compelled to align their operational strategies accordingly.
From a regulatory standpoint, the push for a federal charter may also be interpreted as a way for these companies to voice their need for more uniform regulations. With the crypto market’s unpredictability, regulatory clarity provided by such oversight could foster more stable and transparent operations.
Overall, the pursuit of federal trust charters by leading cryptocurrency firms underscores their dedication to innovation within a unified regulatory environment. This development indicates a potential shift in the regulatory processes impacting how crypto companies operate across jurisdictions, aiming to alleviate complex compliance challenges.
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