The Office of the Comptroller of the Currency (OCC), the largest banking regulator in the U.S., has set new guidelines that allow banks to use public blockchains and stablecoins within the U.S. financial system.
Per the statement, stablecoins can be used to “conduct payment activities and other bank-permissible activities.” The public blockchains can be utilized like the traditional infrastructure such as SWIFT, ACH, and FedWire – payment networks that facilitate global financial transactions between financial institutions.
“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.
He further added that the President’s Working Group on Financial Markets articulated a framework for bringing in a financial infrastructure based on stablecoins, identifying risks, and managing the risks in a technology-agnostic way.
“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,” he concluded.
Banks are allowed to serve as nodes on blockchains. However, any bank that wishes to do so must “comply with applicable law and safe, sound, and fair banking practices.”
The OCC posits that the use of blockchain can improve the efficiency, effectiveness, and stability of payment activities.
Good news for crypto
The latest development is a ray of sunshine for the crypto community which is currently coming to terms with FinCEN’s proposed rulemaking on certain transactions involving digital assets. The crypto community expressed displeasure not only at the proposed guidelines but at the short time given for public comments.
Jeremy Allaire, the co-founder and CEO of Circle, the company behind the stablecoin USDC, expressed his excitement at the news.
“This is a huge win for crypto and stablecoins,” he tweeted.
The U.S. was seen as lagging behind in blockchain innovation but Allaire believes the country is on course to take “a leadership position in embracaing the power of public blockchains.”
5/ 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.
— Jeremy Allaire (@jerallaire) January 4, 2021
In December last year, lawmakers proposed a piece of legislation called the STABLE ACT that requires stablecoin issuers to obtain a banking license.