Today, it was reported that Coinbase and Circle Internet Financial Ltd, both large cryptocurrency exchanges, are eager to embrace and be approved by the US Securities and Exchange Commission, as well as the Federal banking commission. The mission of the SEC is to “protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.”
By getting this approval these two exchanges will bring cryptocurrencies further into the mainstream. Cryptocurrency account holders will be able to get banking services in addition to their crypto services. Regulatory approval for various financial activities, besides just cryptocurrency, could also give more confidence to investors that the exchanges are safe places to do business and put their money. And that will bring more people into the cryptocurrency sphere. Those who might have previously feared or suspected cryptocurrencies might now have the confidence to buy. More buyers would most likely translate into an increased value of various coins.
Circle is backed by Goldman Sachs and it wants to be licensed as a federal bank as well as get SEC approval to be a regulated brokerage firm. This will allow Circle to work with tokens whether they are classified as a security or not. A federal banking license is always difficult to achieve, but if successful, then Circle will not have to worry about separate state banking regulations since federal law trumps state law in this case. A banking license would also bring in many new clients. Some of these clients may only come for the banking, but they may stay for the cryptocurrency. Circle would also no longer have to depend on other traditional banks for many services. Circle would be able to directly access the federal banking system and clear their own international transactions in fiat currency.
Coinbase, which was founded in 2012 and is one of the biggest cryptocurrency trading exchanges in the US, is attempting similar registrations and approvals. Its reasons, and a successful outcome, could be the same as for Circle.
It is thought that both companies would only invest their time and effort into these expensive and difficult approvals if they felt that the risks of regulation were realistic and decreasing. Both companies may also feel that they could actually influence future regulations to their advantage if they were working from the inside.
It is often the fear of excessive government regulations that has depressed the price of cryptocurrencies in the past – this can be seen each time a major new regulation is announced and the price of cryptocurrency often gets slammed. If this is truly the cause and effect, then, conversely, Coinbase’s and Circle’s further entry into the regulatory sphere could indicate that there is light at the end of regulator the tunnel.
