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US Allows Blockchains and Stablecoins for Bank Payments

The Office of the Comptroller of the Currency (OCC), the US Treasury Department bureau charged with regulating banks, announced that banks may now use stablecoins and blockchains for payments.

In a letter issued today, the OCC clarified that, as long as it complies with the law and sound banking practices, “a national bank or federal savings association may validate, store, and record payments transactions by serving as a node on an INVN [independent node verification network]. Likewise, a bank may use INVNs and related stablecoins to carry out other permissible payment activities.”

Brian Brooks, the acting comptroller of the Currency and a former Coinbase executive, indicated in a press release that the move is about leveraging the cryptocurrency industry to keep measure:

“While governments in other countries have built real-time payments systems, the United States has relied on our innovation sector to deliver real-time payments technologies.”

The letter makes it clear, noting that banks face competition to move funds quickly. INVNs, like blockchains and other distributed ledger technologies, are driving the funds efficiently in the OCC’s opinion.

Furthermore, the letter says that banks may issue stablecoins for they might debit cards or checks and then exchange them for fiat. The OCC makes it sound tolerable:

“Banks have long used cashiers’ checks, travelers’ checks, and other bearer instruments as a means of facilitating cashless payments.”

Jeremy Allaire, co-founder, and CEO of Circle, which operates the USDC stablecoin, struck a more emphatic note. He tweeted;

“This is a huge win for crypto and stablecoins.”

Jeremy Allaire, the CEO, and co-founder of Circle struck a more emphatic note. He tweeted. He added: “We are on a path towards all major economic activity being executed on-chain. It is tremendous to see such forward-thinking support from the largest regulator of national banks in the United States.”

Although the OCC has taken a pro-crypto stance regarding financial innovation, its latest memorandum comes among the regulatory uncertainty for the crypto industry.

In December, a separate bureau of the US Treasury, the FinCEN, proposed rules requiring money services businesses, including banks and crypto exchanges, to record and report cryptocurrency transactions to secured wallets that meet a certain dollar threshold. The period for public comment ends today.

While the proposed FinCEN rules would not be mutually exclusive of the OCC rules issued today, it does indicate the air of uncertainty, mostly because of the unveiling of the Stablecoin Tethering and Bank Licensing (STABLE) Act last month.

That bill would regulate stablecoin operators like banks. Rep. Tlaib and other representatives have taken issue with Brooks’ management of the OCC, writing in a letter that he placed “excessive focus on crypto assets and crypto-related financial services.”

Maxine Waters, the House Financial Services Committee Chair, sent a separate letter to President-elect Joe Biden last December, asking him to appoint officials at the OCC who will keep an adequate separation between banks and Fintech companies. One recommendation she gave was to rescind OCC guidance that allows national banks to take custody of cryptocurrencies for their clients, a rule that is built upon.

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