Topic: [2016-04-06]NYT:Bitcoin Start-Up Gets an Electronic Money License in Britain (Read 251 times)

The British government has pushed through its first licensing of a virtual currency company, underscoring its desire to make London a hub for the development of financial technology.

The Financial Conduct Authority, Britain’s top financial regulator, has granted an electronic money license to Circle, a company based in Boston that uses Bitcoin, the virtual currency, to enable consumers to make payments to other consumers using a mobile app, or “social payments” as the company puts it.

The regulator helped Circle get the license by putting it in the government’s Innovation Hub, which is one of several initiatives Britain has undertaken to encourage experimentation in the financial industry.

The license makes it possible for Circle to establish a banking relationship with Barclays, the British bank. It is the first time that a large global bank has agreed to work with a Bitcoin company, though Circle has attracted investments from others.

The British economic secretary to the treasury, Harriett Baldwin, said in an email that the license and Barclays’ relationship with Circle “prove our decision to introduce the most progressive, forward-looking regulatory regime is paying off and cements our status as the world’s fintech capital.”

Circle, which was founded in 2013, already allows customers in the United States to easily send payments to one another and buy and sell Bitcoin, and customers in Britain will now be able to do the same.

But Circle has long aimed to use Bitcoin as a back-end network to make it easier and cheaper to move money between national currencies. The Bitcoin technology, which first emerged in 2009, has been promoted as a way to quickly and cheaply move money across national borders without using traditional money-transmitting services such as Western Union.

Circle is set up so that its customers can hold their money in national currencies to avoid the volatile price of Bitcoin. When a customer wants to move money, he or she can buy Bitcoin for the short period of time required to send the money or simply move dollars or pounds from a linked bank account.

The British license will allow Circle customers to instantly transfer money between dollars and British pounds — and soon enough, between those currencies and euros, given that the e-money license is valid across the European Union.

“For the first time any consumer in the U.S. and the U.K. will be able to beam sterling and dollars back and forth, instantly for free,” said Jeremy Allaire, the co-founder of Circle. “That’s just never been possible.”

It is a difficult moment for the virtual currency. The developers who maintain the basic Bitcoin software have been divided over updates to the software. That has caused a schism in the Bitcoin community and slowed down transactions.

Some companies have been looking at other virtual currencies, such as Ethereum, as an alternative way to transfer money using what is known as a blockchain, the database concept that Bitcoin introduced. Mr. Allaire said that Ethereum was not yet ready for global use in the same way as Bitcoin, but that it could be in the future.

“We are not wedded to one blockchain as the right one,” he said.

In the United States, Circle has not managed to take Bitcoin mainstream, but it has gotten Bitcoin some key seals of approval. Back in 2013, it got funding from the major venture capital firms Accel Partners and General Catalyst Partners. And last year, Circle became the first company to get a so-called BitLicense from New York state’s top financial regulator, the Department of Financial Services.

The New York agency had been the only regulatory body to devise a licensing system for virtual currency companies, trying to confront the fraud and crime that have plagued the technology.

But the British government has taken several steps to emphasize its interest in attracting virtual currency start-ups, among other types of financial technology, to London.

The British chancellor of the Exchequer, George Osborne, publicly purchased virtual currency from a Bitcoin A.T.M. in 2014 at an event where he announced the government’s desire to work with virtual currency companies.

The moves appear to be, at least in part, a way to draw new businesses to London as many parts of the financial industry have struggled with lagging revenue.

Several executives at Barclays have previously discussed the bank’s interest in Bitcoin and the blockchain technology. The bank has labs in London dedicated to experimenting with the technology.