The Office of the Comptroller of the Currency (OCC) has released an interpretive letter that allows federally authorized banks to use cryptos or stablecoins that have relatively stable prices for standard payment activities. In the letter, the banks are also allowed to participate in stable coins-related transaction validation or Independent Node Verification Networks (INVN) in decentralized public ledgers.
OCC Letter to Open New Markets and Era of Faster Payments
In the letter, the agency stated that stablecoins and INVN are the latest technological inventions designed to help perform bank-permissible payment activities. It added that banks have already employed the other types of cashless payments, such as traveler’s checks and cashiers’ checks.
The letter was released on the last day of the comment period for the Financial Crimes Enforcement Network (FinCEN) proposal that called for exchanges to keep transactions on self-hosted wallets. This rule is likely to increase the cost of operations because of the bureaucratic requirements.
This comment is likely to open new markets and usher in another era of faster settlements for payment transactions. Indeed it is already happening. Banks such as JPMorgan Chase & Co have already started using digital coins for institutional clients. Visa Inc has also partnered with Circle Internet Financial to start using stablecoins.
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A Huge Step Ahead for the Crypto Enthusiast
Although stablecoins have become very popular, the regulatory environment has remained unclear. Brian Brooks, a former legal officer at Coinbase, said that the move by OCC is timely and aimed at filling the gap. In 2021, OCC had issued another letter that allowed companies to develop and issue stablecoins.
OCC draws parallels between stablecoins and debit cards to make its case. When one holds electronic stores of value (ESV) cards, such as debit cards, he/she is considered to have an electronic representation of US dollars. However, the definition is technological in nature and does not impact the permissibility of the involved activity.
The letter also captures the benefits like resiliency for adopting decentralized public ledgers. This leaves the gate wide open to include other crypto assets.
OCC Comment Received with Great Enthusiasm
The guidance from OCC has been met with gusto from the crypto community. Stephen Palley, an attorney with Anderson Kill, told Forbes that OCC’s guidance compares to the position it took in the early days of internet banking. OCC approved internet banking despite the early concerns about its safety. Now, OCC continues to demonstrate interest and desire to engage in emerging technologies.
In his suggestion, Kristin Smith, the executive director of Blockchain Association, a respected advocacy group, OCC’s letter is interpretive and indicates that there are people in government who understand the blockchain and cryptos are the basis for the next generation of the payment system.
The OCC’s guideless, according to Jeremy Allaire, the CEO of Circle, is a big win for stablecoins and cryptos. He adds that we are on a path to a huge economic action in blockchains. He added that it is a great thing to see the forward-thinking support from the largest regulator.