Last year, the OCC allowed banks to provide custody services for crypto assets. Now the OCC has decided to allow banks to participate in public decentralized networks and utilize stablecoins for the exchange of value on those blockchains. Not a big surprise given JPM Coin, but still very important to the legitimization of digital currency.
“The OCC in its guidance said there is increasing demand in the market for faster and more efficient payments through the use of decentralized technologies, such as independent node verification networks. And using stablecoins in payment settlements may offer both the efficiency and speed of digital currencies and the stability of existing currencies, the OCC said.
“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 Brooks, the OCC’s acting comptroller, said in the statement.
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The OCC in recent months has been issuing more guidance aimed at easing banks’ concerns about the new financial technology.
Monday’s guidance letter comes as banks become increasingly interested in tapping into stablecoin markets, as the use of stablecoins has boomed over the last two years, according to Jeffrey Alberts, a partner at law firm Pryor Cashman LLP in New York. Cryptocurrency companies, on the other hand, are also interested in having sophisticated banks as partners to take advantage of the banks’ well-developed compliance programs.
It can be challenging for cryptocurrency companies to build compliance programs from scratch, he said. “This is an exciting opportunity for banks to move into an area that is becoming increasingly profitable and do cutting-edge work,” said Mr. Alberts, who co-chairs his firm’s financial institutions group.”
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group
