A powerful financial regulator through the Comptroller of the Currency (OCC) recently clarified details on American national banks’ and federal savings associations’ authority in taking part in using stablecoins to conduct payment activities and other bank-permissible functions.
This was made known in a press release which also highlighted key areas on the use of stablecoin-based financial infrastructure;
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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. Some of those technologies are built and managed by bank consortia and some are based on independent node verification networks such as blockchains,” said Acting Comptroller of the Currency Brian P. Brooks.
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“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.
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“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,” Brooks added.
Recall some months back the U.S banking regulator permitted U.S national banks to hold reserve currencies for stablecoins (Tether, Circle).
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The letter which was released by the Office of the Comptroller of the Currency (OCC) responds to questions regarding the application of stablecoin-related bank activities. It concludes that national banks and federal savings associations may hold “reserves” on behalf of customers who issue stablecoins, in situations where the coins are held in hosted wallets.
Brooks said further, “National banks and federal savings associations currently engage in stable coin-related activities involving billions of dollars each day. This opinion provides greater regulatory certainty for banks within the federal banking system to provide those client services in a safe and sound manner.”
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What are Stablecoins?
Stablecoins are cryptocurrencies created to minimize the price swings that occur in a crypto asset. They are usually pegged to fiat currencies and often exchange-traded commodities.
- Stablecoins give owners a sense of security as users can store their assets whenever there is high volatility in the crypto-verse or other financial markets.