The Office of the Comptroller of the Currency (OCC) has published new guidance on Blockchains and Stablecoins in the United States. Licensed US banks are now allowed to use decentralized networks and regulated stablecoins for payments.
The regulator already showed itself to be Blockchain-friendly six months ago, when it granted U.S. banks permission to hold crypto – a landmark decision. Now the OCC has commented on so-called stablecoins, cryptocurrencies linked to the price of fiat currencies such as the U.S. dollar. It is a hot topic given the strong stablecoin growth in 2020, as well as the initiatives on central bank digital currencies (CBDCs).
Stablecoin framework for US banks
The letter clarifies the authority of national banks and federal savings associations to participate in “Independent Node Verification Networks (INVN) – i.e., Blockchains – as well as to use stablecoins to conduct payment activities and other functions. The OCC also emphasizes the benefits of these networks and says it has no interest in banning them.
“The President’s Working Group on Financial Markets recently articulated a strong framework for ushering in an era of stablecoin-based financial infrastructure, identifying important risks while allowing those risks to be managed in a technology-agnostic way. Our letter removes any legal uncertainty about the authority of banks to connect to blockchains as validator nodes and thereby transact stablecoin payments on behalf of customers who are increasingly demanding the speed, efficiency, interoperability, and low cost associated with these products.” – Brian P. Brooks, Aktueller Comptroller of the Currency
Strong 2020 stablecoin growth
Last year, the market capitalization of the entire Stablecoin market grew tremendously. Tether (USDT) remains dominant, but fully-regulated competitor USD Coin (USDC) is seemingly catching up. This could be related to the regulatory uncertainty surrounding Tether, among other factors.
The OCC’s decision came as a surprise to some. After all, the European Central Bank (ECB) has repeatedly spoken out against private stablecoins and in favor of digital central bank currencies (CBDCs). ECB President Christine Lagarde called privately issued Stablecoins a “threat to the financial status quo in the EU.” Co-founder and CEO of Circle, the company behind the second largest Stablecoin USDC, called the OCC announcement a “huge win” for the Crypto industry.
4/ Decentralized, permissionless, open source and internet mediated software is literally becoming a foundation. Not just for the US financial system but for the global economy.
— Jeremy Allaire (@jerallaire) January 4, 2021