Federally regulated banks can use stable coins to carry out payments and other activities, the Office of Currency Validators (OCC) said Monday.
The federal banking supervisory authority published an interpretative letter addressing the question of whether national banks and federal savings banks could participate in independent node verification networks (INVNs, also known as blockchain networks) or use stable coins. The letter states that these financial institutions can participate as nodes on a blockchain and store or validate payments.
All banks participating in an INVN must be aware of operational, compliance or fraud risks, an OCC press release warned.
Still, the OCC said that because of the large number of nodes required to validate transactions, INVNs “may be more resilient than other payment networks,” which in turn can limit tampering.
Kristin Smith, executive director of the Blockchain Association, said on Twitter, “The letter states that blockchains have the same status as other global financial networks like SWIFT, ACH and FedWire.”
Brian Brooks, the reigning currency converter, said in a statement that while other nations have built real-time payment systems, the US has “relied” on the private sector to develop such technologies and, apparently, has stopped using cryptocurrencies – particularly stable coins – advocate – as an alternative to other real-time payment systems.
Brooks oversaw the release of two other interpretive letters and a number of other crypto-friendly measures during his tenure as head of the agency, including a letter telling the federal banks that they can provide services to stablecoin issuers and store reserves for stablecoins.
Last month, Brooks announced its support for a letter from the President’s Working Group on Financial Markets outlining how stable coins should be regulated in the US
President Donald Trump nominated Brooks twice to head the agency for a full five-year term, including earlier this week. However, it is unclear whether the US Senate will plan a confirmatory vote. At press time, it is unlikely to happen until President-elect Joe Biden takes office on January 20th.
Monday’s interpretation letter also arrives on the same day that a public comment period for a proposed rule by the Financial Crime Enforcement Network (FinCEN) ends. The controversial rule had only 15 days to comment and was reportedly spearheaded by Treasury Secretary Steven Mnuchin, who appointed Brooks to the OCC in early 2020.
“[Monday’s OCC letter] shows that there is no sweeping attack on cryptocurrencies, that there are rays of hope in the government that recognize that crypto networks will form the basis for future payment systems and other financial services applications. Therefore, we welcome this kind of interpretation guidance, ”Smith told CoinDesk on a phone call.
Read the full letter below: