US Federal Regulator Says Banks Can Conduct Payments Using Stablecoins

Federally regulated banks can use stablecoins to conduct payments and other activities, the Office of the Comptroller of the Currency (OCC) said Monday.

The federal banking regulator published an interpretive letter addressing whether national banks and federal savings associations could participate in independent node verification networks (INVNs, otherwise known as blockchain networks) or use stablecoins. The letter said that these financial institutions can participate as nodes on a blockchain and store or validate payments. 

Any banks that do participate in an INVN must be aware of the operational, compliance or fraud risks when doing so, an OCC press release warned. 

Still, the OCC said INVNs “may be more resilient than other payment networks” due to the large number of nodes needed to verify transactions, which can in turn limit tampering.

Kristin Smith, executive director of the Blockchain Association, said on Twitter that “the letter states that blockchains have the same status as other global financial networks, such as SWIFT, ACH, and FedWire.”

Brian Brooks, the Acting Comptroller of the Currency, said in a statement that while other nations have built real-time payments systems, the U.S. “has relied on” the private sector to create such technologies, seemingly endorsing the use of cryptocurrencies – specifically stablecoins – as an alternative to other real-time payment systems.

Brooks has overseen the publication of two other interpretative letters and a number of other crypto-friendly moves during his time overseeing the agency, including a letter telling federal banks they can provide services to stablecoin issuers and store reserves for stablecoins.

Last month, Brooks announced his support of a letter by the President’s Working Group on Financial Markets that outlined how stablecoins should be regulated within the U.S. 

President Donald Trump has twice nominated Brooks to serve a full five-year term heading up the agency, including earlier this week. However, it’s unclear whether the U.S. Senate will schedule a confirmation vote.As of press time, it does not appear likely it will do so before President-elect Joe Biden takes office on Jan. 20.

Monday’s interpretive letter also comes on the same day as a public comment period for a proposed Financial Crime Enforcement Network (FinCEN) rule closes. The controversial rule only had a 15-day comment period, and has reportedly been spearheaded by Treasury Secretary Steven Mnuchin, who appointed Brooks to the OCC in early 2020.

“[Monday’s OCC letter] goes to show that there’s not an all-out assault on cryptocurrencies, that there are bright spots in the government that realize that crypto networks are going to be the foundation of future payments systems and other financial services applications, so we welcome this type of interpretive guidance,” Smith told CoinDesk in a phone call.

Read the full letter below: