OCC or Office of the Comptroller of the Currency (OCC) has declared that it will allow United States Banks to use public blockchains and stablecoins for payment settlements. OCC, a part of the U.S. Treasury and also a banking regulator, made the public announcement on Monday (January 4, 2020) through an interpretive letter. In the letter, OCC published the guidelines for banks who participate in the Independent Node Verification Network (INVN) or blockchain network. The banks can run the nodes to validate, store, and record the banking transactions on the public blockchain network.
The financial institutions welcomed these crypto-friendly guidelines that will open the arena to regulated stablecoin issuers. The guidelines also provide that banks can make use of stablecoins and blockchains for payments only if they comply with the protocols of the banking industry’s best practices. This move may affect the functioning federal banking industry and open up world-wide banking opportunities for them thereby increasing the business. Though OCC has not specified the particular stablecoins or cryptocurrencies that will be allowed, it is implied that only regulated ones will.
The OCC’s acting comptroller, Brian Brooks stated that using stablecoins and blockchain networks by the U.S. banks will improve the efficiency of the federal banks and also guarantee the stability of payments. He also said that OCC wants to remove all the legal uncertainties about the utilization of blockchains by the banking industry. OCC has documented the authority of federal banks to connect to INVN or blockchains as validator nodes. A validator node is a device like a computer on the blockchain network that is designated to verify the payments, check their authenticity and legality, and finally validate the transaction. According to Brooks, such transactions using stablecoins or blockchains will benefit the customers with speedy, efficient, interoperable, and low-cost transactions.
The OCC acting chief has announced recently that banning Bitcoins was not on the worklist of the U.S. financial regulators and promised some cryptocurrency-friendly regulations. This news was a step forward in those directions. In September 2020, OCC had issued another advisory that approved federal banks to hold stablecoin reserves for issuers. These reserve accounts were required to be funded through deposits from the issuers or deposits from individual stablecoin holders.
This Monday’s OCC guidelines allowing the usage of blockchain networks by federal banks comes at an important situation as the U.S. Congress is considering a legislature that will make the law stricter for stablecoins. On the other hand, a group of Democrats has sponsored a bill that will give bank licenses to stablecoin issuers who can then function as banks.
During the end of December 2020, a working group functioning under the President asked for increased control over the stablecoin market and scrutiny over the transactions made thereof. It is also seen that the stakeholders of this industry who are working outside the U.S. are waiting for some further regulations to be introduced that can make the private blockchain network, stablecoin upstage the government-issued fiat currency.