Bitcoin-Friendly Square Obtains Conditional FDIC Merchant Lending License
The U.S. Federal Deposit Insurance Corporation (FDIC) has granted conditional approval for Square to function as an Industrial Loan Company (ILC).
FDIC Grants Square’s Deposit Insurance Application
According to a press release issued on Wednesday (March 18, 2020), the FDIC Board approved Square’s deposit insurance application to create a “de novo industrial bank.” An excerpt from the press release reads:
“The bank, Square Financial Services, Inc., will originate commercial loans to merchants that process card transactions through Square, Inc.’s payments system. Square Financial Services, Inc. will operate from a main office located in the Salt Lake City, Utah.”
With the FDIC approval, the payment company’s proposed bank will provide depositor insurance of up to $250,000. Commenting on the FDIC’s decision, Square’s Capital Lead, Jacqueline Reses released a statement on behalf of the company, declaring:
“We appreciate the FDIC’s thoughtful approach to our application and their recognition that Square Capital is uniquely positioned to build a bridge between the financial system and the underserved. We’re now focused on the work ahead to buildout Square Financial Services and open our bank to small business customers.”
Back in mid-2018, Square withdrew its initial banking license application amid stiff opposition from the Independent Community Bankers of America. Following the announcement of the FDIC approval, some banking consumer advocates and lawmakers from the Democratic Party have also criticized the decision.
Critics of the decision say granting FDIC licenses to companies like Square muddles the distinction between banking and commerce. Others in opposition to the move argue that such licenses pose systemic risks to the country’s financial infrastructure and that Square should fall under more robust regulatory provisions.
Preparing the Way for Square’s 2021 Banking Foray
Square Financial Services — the company’s banking subsidiary, is expected to launch in 2021. According to crypto analytics platform Messari, the news of the FDIC approval could prove to be a landmark development for the cryptocurrency industry given Square’s favorable disposition to digital assets, especially Bitcoin (BTC).
As previously reported by BTCManager, Square sold more than $517 million worth of BTC in 2019. Bitcoin sales reportedly accounted for close to half of its Q4 2019 revenue.
Square CEO Jack Dorsey is also a noted Bitcoin proponent who has previously predicted that the top-ranked cryptocurrency will eventually become the native currency of the internet. Earlier in the year, the company announced plans to contributed towards the development of the Bitcoin Lightning Network.