The leading US banking regulator approved stablecoins for interbank settlements on financial transactions.
National banks and federal savings associations in the United States gained the right to participate in blockchain networks (Independent Verification Node Networks, or INVNs) and use stablecoins to carry out payment transactions, according to an interpretive letter from the Office of the Comptroller of the Currency (OCC). According to the document, financial institutions can participate in blockchain networks as validator nodes and store or confirm transactions.
Any banks that participate in blockchain networks must be aware of operational risks, comply with regulatory requirements, and resist fraud, the OCC press release warns.
The banking regulator adds that “such activities may be more resilient than other payment networks because of the decentralized nature”, which in turn withstands the risks of falsification, limits tampering, or adding inaccurate information.
“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,” said acting comptroller of the currency Brian P. Brooks.
Christine Smith, executive director of the Blockchain Association, tweeted that “the letter states that blockchains have the same status as other global financial networks, such as SWIFT, ACH, and FedWire.”
While the OCC’s announcement increased investor interest in cryptocurrency, the permit does not apply to decentralized assets such as bitcoin. The lifting of the alleged restrictions applies to regulatory-approved coins issued by banks and digital currencies of central banks.
On his Twitter thread, Circle co-founder Jeremy Aller hailed the OCC letter as a huge win for the cryptocurrency industry.