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Crypto banking firm FairX has closed its digital doors after it failed to secure funding for a banking license.
As per its Twitter thread, the company has been “on a tear” for the past 14 months as it attempted to obtain the necessary financial backing to establish a licensed national bank, which is supposedly “modeled as a financial market utility that would work with individuals and banks to create a dematerialized bank deposit, denominated in USD. The bank was Frank Financial.”
Let me start right off the bat by telling you our original goals of creating a licensed national bank is unfortunately failing. The immediate reason is simply a lack of funding - for the past 14 months we’ve been on a tear trying to raise money.
— fairx (@fairxio) July 19, 2019
It further explained that the dematerialized bank deposit would serve somewhat as a stablecoin to crypto traders but with some key differences. The company said that most stablecoins are “doomed for failure,” as the reserves backing them are not owned by the token holder, but by the stablecoin issuer.
“In other words, a stablecoin issuer takes your cash, deposits it into a bank, and issues you a coin. That cash belongs to the issuer – the legal arrangement of such is articulated in its deposit agreement with the bank backing it," it said,
The company admitted that it succeeded in introducing its business concept to regulators, complying with Know Your Customer, Anti-Money laundering, and Counter-Terrorism Financial rules. But FairX realized it needs to secure more investment, between $150 million and $250 million, when it launched its binary stage.
The crypto investment community reportedly withdrew because of the perceived centralization of the bank, as Cointelegraph noted.
“Because all pre-formation raises must be priced the same, investors at this stage are unable to receive ‘preferred shares’, or shares with different rights and etc. More importantly, these pre-formation shares must be priced the same - FOR EVERYONE. This scared off 99% of VCs.”
“At the end of the day though, before filing the application you need to have funding committed, with participants fully vetted and ready to go. And we had significant trouble getting this commitment. Either VCs weren’t getting a big enough return, or crypto investors hate fiat.”
Peer-to-peer payment network firm Circle is also on its way of ending its support for its mobile app Circle Pay to develop new crypto financial services. Circle is eyeing to explore more on new blockchain-based financial products, which include launching new wallet services and enabling digital currency adoption.
