OCC Authorizes U.S. Banks to Hold Stablecoin Reserves
The U.S. banking regulator has issued guidelines that will enable banks to offer services to stablecoin coin issuers in the country.
Federal Financial Institutions to Offer Services to Stablecoin Issuers
In an interpretive letter published by the Office of the Comptroller of the Currency (OCC) on Monday (September 21, 2020) federal financial institutions now have the green light from the OCC to hold reserves for stablecoin issuers. The guideline is the first of its kind regarding fiat-backed stablecoins in the U.S.
According to the letter, the new regulation currently applies to cryptocurrencies pegged 1:1 to fiat currency like Tether and USD Coin. Also, the new guideline covers stablecoin held in hosted wallets (wallets controlled by a third party), while exempting support for un-hosted wallets, that is, wallets controlled by the individual.
The OCC giving banks the go-ahead to service stablecoin providers could hold significant implications for the crypto market at large. Stablecoins are the primary liquidity vehicle for the bulk of cryptocurrency trading activities across the world.
Commenting on the latest development, Brian P. Brooks, Acting Comptroller of the Currency, said:
“National banks and federal savings associations currently engage in stablecoin-related activities involving billions of dollars each day. This opinion provides greater regulatory certainty for banks within the federal banking system to provide those client services in a safe and sound manner.”
The OCC’s guideline was welcomed by both industry stakeholders and the crypto community. Jeremy Allaire, CEO and Co-founder of crypto fintech firm Circle, lauded the development, in a tweet thread, stating:
“Very encouraging to see this progress being made in the continued recognition of full-reserve digital dollar stablecoins such as $USDC as building blocks of our new financial system.”
Also, Kristin Smith, executive director of the Blockchain Association, stated that the OCC’s letter was an “important step” towards the growing adoption of dollar-backed stablecoins without needing a central bank digital currency (CBDC). However, Smith called for clearer regulations regarding hosted and unhosted wallets.
Crypto Regulations Becoming Clearer
The OCC’s announcement follows an earlier letter published back in July, which allowed federal banks to offer custodial services for crypto assets. As reported by BTCManager in June, the OCC sought public opinion on the engagement of banks regarding cryptocurrency.
With the lack of robust crypto regulations having crippled the development of the sector in the U.S. for a long time, recent attempts to provide clear rules could encourage more crypto businesses to move to the U.S.
In mid-September, BTCManager reported that 48 U.S. states agreed to a joint money transmitter licensing regime. The simplified process meant less cumbersome and cheaper means of obtaining license for crypto and fintech payment companies.
