- Possible sign that big banks are warming to the cryptocurrency
- Firms have focused on blockchain rather than bitcoin
Barclays Plc and the U.K.’s Financial Conduct Authority opened the British market to Circle Internet Financial Ltd., a startup that uses bitcoin to allow users to send each other payments, in a sign that global banks and regulators are overcoming their reservations about the cryptocurrency.
U.K. consumers will be able to use Circle’s “social payment app” to transfer sterling for free, the Boston-based company said Wednesday in a statement.
Barclays, Britain’s No. 2 bank with 1.5 trillion pounds ($2.1 trillion) in assets, is providing the company with commercial banking services. The FCA, which has set up an “innovation hub” to stoke the development of fintech companies, granted Circle an e-money license to conduct business in the U.K. The agency has approved more than 80 money-transfer companies for such licenses since 2011, though a spokeswoman couldn’t confirm whether Circle is the first to use bitcoin.
“It’s very telling to see Barclays banking a company engaged in bitcoin-related activities,” said Eric Van der Kleij, the former head of Level39, a London-based firm that helps nurture fintech startups. “The announcement has the industry wondering if this is one of the turning points for the Internet of money.”
Circle, which received an investment from Goldman Sachs Group Inc. in a $50 million funding round last April, works by converting dollars and pounds into bitcoins. The app then sends the bitcoins to a recipient where they’re re-converted back into dollars or pounds. The process is instantaneous and invisible to users.
Until now, banks have largely avoided bitcoin because cybercriminals use the cryptocurrency to fund drug sales and other illicit activities on the Internet. Many bitcoin startups have found it difficult to even open bank accounts at British lenders.
Instead, companies ranging from Bank of America Corp. to Banco Santander SA to Blythe Masters’ Digital Asset Holdings Inc. have separated the digital currency from its underlying technology, the blockchain. There are scores of projects under way globally to use this “distributed ledger” to make asset transfers and payment processing faster and more efficient.