In an interpretive letter, the Office of the Comptroller of the Currency (OCC) states that national banks and federal savings associations can use stablecoins to conduct payments and other activities.
These institutions can also participate as crypto nodes on a blockchain, and store or validate payments, as long as they are compliant with existing laws.
It also mentions blockchain networks as a “cheaper, faster, and more efficient” means of payment for cross-border transactions. Therefore, it is to allow banks to utilize blockchains and their stablecoins, for converting to and from fiat during remittances.
Banks can even issue stablecoins if they choose.
The US banking regulator warned any banks participating in a blockchain network must be aware of the operational, compliance, or fraud risks. Nevertheless, the OCC said blockchain networks “may be more resilient than other payment networks”. The large number of nodes responsible for verifying transactions can limit tampering, OCC said.
The new guidance opens the possibilities that banks will use blockchains and stablecoins to transfer funds between financial institutions faster, and without the need of a government intermediary.
Stablecoin As Alternative to SWIFT
Acting Comptroller of the Currency Brian Brooks said in a statement that while other nations have built real-time payments systems, the U.S. “has relied on” the private sector to create such technologies.
The statement from the former Coinbase head of legal endorses the use of cryptocurrencies – specifically stablecoins – as an alternative to other real-time payment systems.
In September 2020, the OCC stated that federally chartered banks can hold reserve funds for fiat-backed stablecoin issuers.
“The letter states that blockchains have the same status as other global financial networks, such as SWIFT, ACH, and FedWire,” Kristin Smith, executive director of the Blockchain Association tweeted following the announcement.
“This is a huge win for crypto and stablecoins,” tweeted Jeremy Allaire, co-founder and CEO of Circle, which operates the USDC stablecoin.
USDC is one of the major fiat-backed stablecoins available in the market. Others include Tether (USDT), TrueUSD (TUSD), Paxos Standard (PAX) and Gemini Dollar (GUSD).
PAX and GUSD have been regulated by the New York State Department of Financial Services (NYDFS) since 2018.