Federal regulators now allow banks to conduct payments using stablecoins
By Bob Garcia
The Office of the Comptroller of the Currency clarifies its position on cryptocurrencies and banking
The road to acceptance of cryptocurrency at a regulatory level in the US is long and bumpy, but progress is being made. The latest example of a change in how crypto is perceived comes from the Office of the Comptroller of the Currency (OCC), which has provided clarification on whether banks and financial institutions can work with certain aspects of digital currency. As far as the federal banking regulator is concerned, there is nothing that stands in the way of the banking world moving deeper into the crypto space.
The OCC explained in a letter yesterday that banks and federal savings organizations are able to participate in independent node verification networks, which is a fancy term for blockchain networks. They can also use stablecoins without any concern over regulatory blowback. The OCC cautioned, however, that the entities are responsible for understanding the risks involved and are on the hook for any problems that might arise.
The regulator explained in its letter that it has always encouraged innovation in the banking space and that it believes blockchain technology is just an extension of the channels available to financial institutions to conduct transactions. It adds, “[A] bank may use stablecoins to facilitate payment transactions for customers on a [blockchain], including by issuing a stablecoin, and by exchanging that stablecoin for fiat currency.
In this context, stablecoins function as a mechanism of payment, in the same way that debit cards, checks, and electronically stored value (ESV) systems convey payment instructions. Banks have long used cashiers’ checks, travelers’ checks, and other bearer instruments as a means of facilitating cashless payments.”
This revelation is going to have an impact on banking, even if it takes three or four years for it to be realized. Digital currencies, to a certain degree, have just gotten the green light from the office that controls the money in the US, which will go a long way toward introducing new crypto solutions.