Coinbase Seeks License To Expand Payments And Custody, Aims To Bridge Crypto-TradFi Gap

US crypto exchange Coinbase has applied for a license to offer broader payments and custody services, aiming to bridge the gap between crypto and traditional finance.

The exchange aims for National Trust Company Charter status, which would give it more authority to hold customer assets, process payments, and offer some financial services.

”The charter would continue to open up opportunities for Coinbase to launch new products beyond custody, including payments and related services, with the confidence of regulatory clarity,” it said in a statement.

Coinbase clarified that “it has no intention of becoming a bank,” saying that the license is part of its broader strategy “to bridge the gap between the crypto economy and traditional financial system.”

Coinbase shares climbed 2% on the news, according to Google Finance.

Coinbase share price (Source: Google Finance) 

Is Coinbase Hedging Against ‘Debanking?’

The move could also be a way to mitigate the risk that banks will close off client access to Coinbase in the event of an Operation Choke Point repeat.

Operation Choke Point was launched around 2013 by the US Department of Justice (DOJ) and was aimed at investigating banks and their relationships with certain industries that were deemed “high risk” for fraud or money laundering.

Under the former Joe Biden Administration, many crypto firms reported that banks were restricting client access.

While regulatory pressure against crypto firms has eased under the Donald Trump administration, some firms have still reported that banks are quietly refusing service or are “debanking” crypto firms.

In a podcast that was published Thursday, a former Coinbase employee by the name of Yuke Youngblood explained that the license that Coinbase applied for would enable the exchange to “offer basically built-in on-ramp, off-ramp” services.

This would then remove the need for Coinbase to work with banks in order for clients to deposit and withdraw fiat currency.

Today, Coinbase’s main regulated custody service is operated through Coinbase Custody Trust Company (CCTC). The entity is licensed under New York state’s BitLicense regime, which was introduced in 2015 and was one of the earlier state-level US regulatory models for crypto.

Coinbase said in its statement that the approval of the National Trust Company Charter license would also allow it to expand beyond custody services, and open the door for the exchange to launch payments and other related offerings under clearer regulatory guidance. 

Other Crypto Firms Have Applied For National Trust Charter

Coinbase is not the only crypto firm looking to bridge the gap between the digital asset and traditional financial markets. 

In July, USD Coin (USDC) stablecoin issuer Circle applied to establish a national trust bank in the US. Shortly thereafter, Ripple Labs also applied for the same license.