In a ‘huge’ win, regulator says banks can make payments with stablecoins

A main U.S. banking regulator has said that banks can use stablecoins to make payments and for other activities.

On Jan. 5, the Office of the Comptroller of the Currency published an interpretive letter explaining that national banks and federal savings associations are allowed to use stablecoins and run blockchain nodes. 

In a release, Acting Comptroller of the Currency Brian P. Brooks, a former Coinbase executive, said:

“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.”

While noting that blockchain networks “may be more resilient than other payment networks” thanks to their tamper-proof nature, the regulator warned that “in deploying these technologies, a bank must comply with applicable law and safe, sound, and fair banking practices.” 

In the wake of the announcement, Jeremy Allaire, CEO of USDC Stablecoin-issuer Circle, said Brooks’ latest move is “a HUGE way to start 2021, the year that crypto and stablecoins go mass market!” He added:

“The significance of this can’t be understated.”

The announcement “paves the way for the use of leading dollar digital currencies such as USDC as a mainstream payment medium for all forms of payments and settlement, and helps put the U.S. in a leadership position in embracing the power of public blockchains,” Allaire said. He noted:

“It also sets the stage for more regulated financial institutions to run blockchain nodes, and even become validators.”

Blockchain Association executive director Kristin Smith said that the letter “states that blockchains have the same status as other global financial networks, such as SWIFT, ACH and FedWire” in a Jan. 5 tweet. 

The announcement is just the latest step that the OCC has taken to open the United States’ banking ecosystem to crypto and blockchain.

As Modern Consensus reported in July, the OCC clarified in another letter that U.S. banks and federal savings associations are allowed to provide custody services for cryptocurrencies. 

In November, the regulator also proposed a rule that would require banks to “provide access to services, capital, and credit based on the risk assessment of individual customers, rather than broad-based decisions affecting whole categories or classes of customers” to protect crypto firm’s access to finance.