US banking regulator gives green light to use stablecoin for federally chartered banks

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National banks and federal savings associations can use blockchains and public stablecoins for settlement, the Office of the Comptroller of the Currency (OCC) said in an interpretive letter released Monday evening.

The letter says banks and savings associations can now run crypto nodes and use associated stablecoins for “authorized payment activities.” This means that banks can use public blockchains to validate, store, record and settle payment transactions as long as they comply with applicable laws.

It also specifically mentions the use of stablecoins for transactions, claiming that blockchain networks can mitigate the costs of cross-border transactions as a “cheaper, faster and more efficient” means of payment. For this reason, it allows banks to use blockchains and their stablecoins for converting to and from fiat when sending money – and even to issue stablecoins if they choose.

The regulator noted:

Likewise, a bank can use stablecoins to facilitate payment transactions for customers on an independent node verification network, including issuing a stable coin and exchanging that coin for fiat currency.

As the letter notes elsewhere:

“Just as banks can buy and sell ESVs to convert ESVs to dollars (and vice versa) to complete customer payment transactions, banks can buy, sell and issue stablecoins to facilitate payments. For example, one entity (payer) may wish to make a payment in US dollars to a second entity (payee). Rather than using a centralized payment system, the payer converts US dollars into stablecoin and transfers the stablecoin to the payee via the INVN. The recipient then converts the stablecoin into US dollars. In a common version of this factual diagram, the payment is a cross-border remittance. “

Acting Comptroller of the Currency and former Coinbase Chief Legal Officer Brian Brooks said the letter was in response to a recent statement on stablecoins released by the president’s financial markets task force. This report indicates that regulators may consider limitations on “multi-currency stablecoins” and highlighted the possible risks of one-to-one tokens.

“Our letter removes any legal uncertainty regarding the power of banks to connect to blockchains as validator nodes and thus make stable payments on behalf of customers who increasingly demand speed, efficiency, interoperability and low cost associated with these products, ”said Brooks. in a report.

Last fall, the OCC said federally chartered banks can hold reserve funds for trust fund-backed stablecoin issuers, as previously reported.

Read the full letter below.

nr-occ-2021-2a by MichaelPatrickMcSweeney on Scribd

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