Coinbase Eyes Federal Bank Charter—A Power Play or Regulatory Hail Mary?

The crypto giant weighs a U.S. banking license—because what’s a bull market without a little regulatory arbitrage? If approved, the move could let Coinbase offer FDIC-insured accounts, bypassing the regulatory purgatory plaguing crypto-native firms. But skeptics whisper: ’Since when did Wall Street let fintechs sit at the big kids’ table?’ One thing’s clear—the SEC isn’t sending a congratulatory fruit basket.

• Coinbase seeks a U.S. federal bank charter, which will enable traditional banking services.
• A banking license could allow Coinbase to accept deposits and provide loans.
• Coinbase’s move follows interest from other crypto firms like Circle and BitGo.

Crypto exchange Coinbase, based in the U.S., confirmed that it is considering applying for a federal banking charter to expand its services within the traditional financial system. A representative from Coinbase said that the company continues to research banking charter decisions, although any official choice remains pending.

These reports were released while major crypto firms, including Coinbase, stablecoin issuer Circle, and crypto custodian BitGo, planned applications for U.S. banking licenses. The licenses would transform the companies into financial entities able to provide banking services like deposit facilities and loan programs. 

Coinbase has given no specific details about its banking charter contemplation, but obtaining such a charter provides enhanced access to Federal Reserve security measures and deposit insurance to safeguard user funds.

Rising Interest in U.S. Banking Licenses for Crypto Firms

The cryptocurrency industry displays broader trends as Coinbase evaluates obtaining a banking license alongside other crypto firms interested in offering conventional banking services. This interest echoes what Coinbase CEO Brian Armstrong said earlier.

He mentioned that Coinbase’s volume of consumer funds managed could position it as the 21st largest bank in the U.S. Such a move would allow crypto firms to engage in otherwise restricted services, like lending and accepting deposits.

Other companies, including crypto custody provider BitGo and Circle, which issues the USDC stablecoin, are also considering obtaining a full banking license. If undertaken, these companies would be granted substantial financial protections, though acquiring a banking license is highly regulated and comes with expensive compliance costs. Anchorage Digital is currently the only crypto-native firm to hold a banking license, having invested tens of millions of dollars to meet regulatory requirements.

Regulatory Climate Shift Under U.S. Administration

Coinbase and other crypto firms are increasingly likely to get a banking license under the U.S. administration’s more lenient regulatory approach. The U.S. government has recently shown indications of opening up to incorporating digital assets in the larger financial system, including efforts by the Federal Reserve regarding stablecoins.

💥JUST IN: Coinbase, Circle, BitGo, and Paxos all looking to apply for bank licenses or charters [WSJ]

Additionally, Federal Reserve Chair Jerome Powell has said that stablecoins could be useful with a suitable legal framework to pave the way for mainstream adoption, given the sector’s consumer appeal.

The STABLE Act and the GENIUS Act are among several bills being reviewed by U.S. lawmakers to clarify the legal situation for stablecoins and other digital assets. These developments could bring regulatory certainty for crypto firms, allowing them to work safely within this existing financial system.