What Circle's e-money license means for Bitcoin and blockchain

Rage Comment : Circle has become the world's first Barclays Bank partner and the first digital currency company to obtain an FCA electronic money license, which has successfully attracted widespread global attention. James Wester, research director of IDC Financial Insights, believes that the acquisition of the license means that banks will become the core of blockchain technology in the future, providing a model for global financial companies to cooperate with the government. Jerry Brito, director of Coin Center, believes that the British government's move on digital currency proves that the United States has fallen behind the United Kingdom in the field of Internet finance. This proves that the government's attitude has a very important impact on the development of technological innovation.

Translation: Annie_Xu

Previously, Circle Internet Finance announced that it had obtained an electronic money license from the UK Financial Conduct Authority (FCA), followed by a wave of positive industry news reports.

However, despite the frenzy surrounding Circle’s license, some are still confused about the nature of Circle’s license and how it can be used to further its business. It is worth noting that the E-Money Directive was introduced in the UK in September 2009, but the E-Money license is not specifically for digital currencies. It is reported that the FCA is still debating how to regulate digital currencies in the UK.

However, the UK Treasury informed European countries that the e-money license does not allow Circle to cooperate with

Of course, the license is currently sufficient to support Circle's cooperation with British banking giant Barclays. Therefore, industry commentators have expressed their belief that the issuance of this license will greatly increase the awareness of Bitcoin and blockchain technology.

James Wester

For example, James Wester, research director at IDC Financial Insights, believes that the news means that the idea that blockchain and distributed ledgers will disrupt the payment and banking industries is beginning to fade; banks may become the key to promoting the widespread application of emerging technologies.

“Banks are starting to explore the potential of blockchain technology on their own, so you may see a growing community around blockchain and connections between financial services providers, merchants, and regulators.”

Wedbush Securities analyst Gill Luria echoed this sentiment, declaring his belief that Circle’s e-money license puts pressure on global regulators; a sentiment widely shared by the community.

“I hope other regulators can simply regulate real financial services, regardless of what online platform those services are on.”

Overall, some have compared Circle’s e-money license to its traditional U.S. money services business (MSB) license; its U.S. license allows Circle to provide U.S. dollar services in all 50 states.

Therefore, they point out that e-money licenses, equivalent to their digital currency services, can be more directly related to the company's goal of reshaping the payment industry's business model with blockchain technology; therefore, it is unlikely to have a greater impact on startups.

Market Leader

Commentators almost simultaneously believed that the announcement of the license further established Circle’s position as a market leader in the digital currency field. In 2013, Brightcover founder Jeremy Allaire and his senior architect Sean Neville founded Circle, which subsequently raised $76 million in three rounds of financing, with investors including the well-known Goldman Sachs and Fenway Summer.

Wester noted that Circle’s license allows it to conduct cross-border and cross-currency fund transfers from Europe to the United States, helping it to test important use cases for blockchain at scale.

“These transactions are often cited as excellent use cases for blockchain technology, so this is particularly interesting.”

Circle is the first company to receive a license in New York since the state issued its regulatory policy BitLicense in 2015. It is estimated that more than 20 companies are already waiting for the issuance of a formal license, although the New York Department of Financial Services (NYDFS) has promised to follow up.

Dana Syracuse, an attorney at BuckleySandler LLP who worked on the New York BitLicense policy project, said the Circle license is an example of how financial services companies can use government regulation to compete for investment and business.

“Ultimately, corporate compliance will differentiate companies in the market.”

Circle Chief Compliance Officer John Beccia further emphasized that regulation has become Circle’s key competitive advantage, even if other businesses’ strategies may not require traditional currency services.

“Cooperation and mutual understanding with regulators from the outset helps attract investors and banks and enter the market faster.”

Britain is ahead

Globally, commentators believe that this news shows that Britain and the United States are competing for leadership in global Internet financial innovation.

US commentators were keen to highlight the announcement as proof that the UK’s strategy to encourage the development of the blockchain industry has shown its success in encouraging technological innovation.

Jerry Brito

Jerry Brito, director of Coin Center, believes that Circle’s opportunities to expand its business in Europe are unlikely to be realized in the United States because Bitcoin regulatory policies vary from state to state.

"If the United States does not wake up, it will find itself lagging behind and will lose its competitive advantage."

"It's not a coincidence that the UK has found that this allows it to compete globally with the US."

Brito mentioned the case of Bitcoin exchange itBit stopping serving Texas consumers, which proved that the backwardness of US regulators in blockchain technology prevented the further development of the digital currency ecosystem and was proof of the inconsistent policies of US states.

Becci agreed with the above view and believed that the FCA's regulatory measures were worthy of praise.

“This move provides the message that the UK has been very active in blockchain technology. They support the development of Internet finance and have created a good development environment for blockchain technology.”

Joe Colangelo, executive director of Consumers' Research, agreed with the view, saying Britain's progress had a potential negative impact on the United States and that the announcement would also encourage more innovation overseas.

He concluded:

“I wouldn’t be surprised if this simple support policy from the UK attracts more bitcoin and blockchain companies to set up shop overseas in the future.”