OCC Says Federally Chartered Banks May Engage In Certain Stablecoin Activities

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After recently allowing them to begin offering cryptocurrency custody services for customers, the Office of the Comptroller of the Currency (OCC) has now clarified in a letter that federally chartered banks and thrifts 'may engage in certain stablecoin activities.'

The OCC had noted in July that providing cryptocurrency custody services, including holding unique cryptographic keys associated with cryptocurrency, is a modern form of traditional bank activity related to custody services.

The OCC is a federal agency that oversees the execution of laws relating to national banks. It charters, regulates, and supervises national banks and federal branches and agencies of foreign banks in the U.S.

The OCC today clarified national banks' and federal savings associations' authority to hold "reserves" on behalf of customers who issue certain stablecoins.

Acting Comptroller of the Currency Brian Brooks noted that national banks and federal savings associations currently engage in stablecoin-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," Brooks added.

A stablecoin is a type of cryptocurrency backed 1:1 by an asset such as a fiat currency, including U.S. dollars or other foreign currency. It designed to have a stable value as compared with other types of cryptocurrency, which frequently experience significant volatility.

Reports suggest that stablecoins have various applications, including the potential to enhance payments on a broad scale, and are increasingly in demand.

Stablecoin issuers may desire to place assets in a reserve account with a national bank to provide assurance that the issuer has sufficient assets backing the stablecoin.

The OCC concludes that national banks and federal savings associations may hold such stablecoin "reserves" as a service to bank customers, in situations where the coins are held in hosted wallets.

The letter addresses the use of stablecoins backed by a single fiat currency on a one-to-one basis where the bank verifies at least daily that reserve account balances meet or exceed the number of the issuer's outstanding stablecoins.

Separately, the U.S. Securities and Exchange Commission (SEC) Strategic Hub for Innovation and Financial Technology Staff (FinHub Staff) enquired if the OCC referred stablecoin is determined as a security under the federal securities laws.

FinHub Staff added that this determination requires a careful analysis of the nature of the instrument, including the rights it purports to convey, and how it is offered and sold.

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