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Twitter founder Jack Dorsey ventures into compliant business loans, Square has been approved by the FDIC

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Twitter founder Jack Dorsey ventures into compliant business loans, Square has been approved by the FDIC

Twitter CEO and Bitcoin advocate Jack Dorsey recently received approval from the U.S. Federal Deposit Insurance Corporation to allow Square Financial Services, a subsidiary of his financial services company Square, to offer compliant business loan services to enterprise customers. This significant development paves the way for Square's banking operations next year.

First Approval in Over a Decade

According to a press release from the FDIC, the organization has approved Square's subsidiary, "Square Financial Services," to offer commercial loans to businesses using the Square payment system. This marks a significant milestone for the company as the FDIC has not approved such an application for an industrial bank in over a decade. FDIC Chairman Jelena McWilliams stated:

"The FDIC evaluates all deposit insurance applications in accordance with the statutory standards set forth in the Federal Deposit Insurance Act. It has been over a decade since the FDIC last approved the deposit insurance application of an industrial bank or an industrial loan company."

Jack Dorsey later thanked the FDIC for the approval on Twitter.

Paving the Way for Banking Operations

Square Financial Services is expected to be established in 2021. It will operate as a direct subsidiary of Square independently. Its main purpose is to provide small business loans to enterprise clients of Square Capital and offer deposit products. The bank's headquarters will be located in Salt Lake City, Utah, and has received approval from the Utah Department of Financial Institutions.Approval has been granted.

Obtaining FDIC's business license undoubtedly sets the stage for the bank's development in 2021. In fact, gaining approval from the FDIC is no easy task as the organization rigorously reviews deposit insurance applications, requiring applicants to meet at least seven criteria such as "general character and fitness of management," "capital structure of the institution," and "future earnings prospects," among others. Moreover, the threshold for submitting an application is high. According toregulations, applicants must raise approximately $56 million in initial capital to be eligible to apply to the FDIC.

Jack Dorsey's Trials with Square

Jack Dorsey, who serves as the CEO of both social platform Twitter and payment company Square, is optimistic about the development of cryptocurrency. Square's Cash App was also created for Bitcoin transactions. Recently, he faced a warning from Elliott Management, a major shareholder of Twitter, claiming that he was not focused on Twitter and threatened to replace him, causing a stir.

Ultimately, Elliott Management's partner Jesse Cohn issued a statement in early Marchstating:
"I look forward to collaborating with Jack and the board to contribute to realizing Twitter's full potential." A temporary board was also set up to regularly review Twitter's performance. Jack Dorsey was able to retain his position.

Further Reading

  • Payment App Square to Launch Bitcoin Investment Feature
  • Twitter Forms New Independent Team to Develop Decentralized Standard Architecture

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