Office of the Comptroller of the Currency US federal banking regulator issued new guidance allowing US banks to use public blockchains and dollar stable coins as a settlement infrastructure.
Cryptocurrency prices briefly popped late Monday, after a federal banking regulator said in an interpretive letter that U.S. financial institutions are allowed to use stable coins for payment activities, and can participate as nodes in a blockchain.
The letter from the Office of the Comptroller of the Currency is the latest crypto-friendly move from the Treasury Department office.
“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,” Acting Comptroller of the Currency Brian Brooks said in a statement.
Since that time, the OCC has provided interpretive letters and guidance clarifying that banks can custody cryptocurrency and stablecoins, as well as engage in stablecoin activity. The OCC also created a Special Purpose Payments Charter for FinTech companies. In December the Chief Economist of the OCC, Charles Calomiris, published a paper titled “Chartering the FinTech Future,” in which Calomiris set out the benefits of the OCC providing bank charters to stablecoin providers.
This means that banks can treat public blockchains as infrastructure similar to SWIFT, ACH, and FedWire, and stablecoins like USDC as an electronic store of value
As today’s OCC interpretive letter notes, “over time, banks’ financial intermediation activities have evolved and adapted in response to changing economic conditions and customer needs. Banks have adopted new technologies to carry out bank-permissible activities, including payment activities.
The changing financial needs of the economy are well-illustrated by the increasing demand in the market for faster and more efficient payments through the use of decentralized technologies, such as INVNs, which validate and record financial transactions, including stablecoin transactions.”
Kristin Smith, Executive Director of the Blockchain Association noted to me, “ The OCC’s interpretive letter shows that there are those in government who actually understand that cryptocurrency networks are the foundation of a next generation payments system. Stablecoins, like USDC, can power faster, 24-hour real time payments in a way that existing US payments infrastructure can’t handle.”
Nic Carter, Partner of Castle Island Ventures added, this will allow banks “to take advantage of the always-on features of public blockchains.”