The Office of the Comptroller of the Currency (OCC) has authorized federally chartered banks to hold “reserves” for Stablecoin Issuers.
OCC
Federally Chartered Banks and Thrifts Are Allowed to Participate in Selected Stablecoin Activities
Stablecoins are cryptocurrencies that are backed by an asset, such as fiat currency, including U.S. dollars or foreign currencies.
https://www.occ.gov/news-issuances/news-releases/2020/nr-occ-2020-125.html
“National banks and federal savings associations are currently engaged in stablecoin-related activities involving billions of dollars daily,” said Acting Comptroller of the Currency Brian P. Brooks. “This opinion enhances regulatory clarity for banks in the federal banking system, allowing them to provide these client services in a secure manner.”
SEC
FinHub Staff Statement Regarding OCC Interpretation
“The SEC’s Strategic Hub for Innovation and Financial Technology Staff (FinHub Staff) has issued a statement on the OCC’s interpretation concerning the authority of national banks and federal savings associations to maintain stablecoin reserves. The OCC has limited its interpretation to include holding reserves for a stablecoin linked to hosted wallets that is backed by a single fiat currency and redeemable on a 1:1 basis by the holder upon submitting a redemption request to the issuer.”
https://www.sec.gov/news/public-statement/sec-finhub-statement-occ-interpretation
OCC Response
The OCC’s communication specifically mentions Stablecoins that equate to a U.S. dollar at a 1:1 ratio and clarifies that its guidance only pertains to Stablecoins held in hosted wallets, which are controlled by a trusted third party. Unhosted wallets, managed by the individual user holding the cryptocurrency, are not included in this recent announcement.
Acting Comptroller of the Currency, Brian Brooks, stated in the letter;
“Stablecoins are cryptocurrencies backed by an asset such as fiat currency, including U.S. dollars or other foreign currencies,”
Brooks, a former general counsel at Coinbase, noted that Stablecoin issuers may leverage the fact that regulated banks hold their reserves to reassure the public of their safety.
“National banks and federal savings associations currently engage in Stablecoin-related transactions amounting to billions of dollars each day. This opinion offers increased regulatory assurance for banks within the federal banking system to deliver their client services safely,”
SEC Response
In a parallel announcement, the U.S. Securities and Exchange Commission (SEC) recognized the OCC Chief’s letter and pointed out that specific stablecoins are not classified as securities under federal law, urging stablecoin issuers to collaborate with the SEC for clarity.
The SEC also indicated its readiness to issue a “no-action” letter to stablecoin issuers, assuring them that they would not face federal law enforcement actions. The SEC added,
“Whether a stablecoin qualifies as a security under federal law is a determination that hinges on specific facts and circumstances. This evaluation necessitates a careful consideration of the instrument’s nature, including the rights it claims to convey, as well as how it is marketed and sold.”
Centre Consortium CEO
Jeremy Allaire, the CEO and Chairman of Circle, which issues the USD Coin (USDC) in partnership with Coinbase, affirmed that these letters would provide regulatory protection for technology and financial companies.
Jeremy Allaire remarked,
“The newly issued guidance and insights from the US Treasury’s Office of the Comptroller of the Currency (OCC) symbolize significant progress for the integration of digital dollar stablecoins into the U.S. financial framework.” Allaire also emphasized that, “As an issuer, this guidance corroborates our strategy in creating a resilient, powerful, and standardized approach for employing digital dollars online.”
Allaire confirmed a marked increase in demand,
“While I cannot represent other stablecoin projects, at CENTRE, we have experienced robust interest from various banking institutions seeking to engage in reserve banking with stablecoin clients,”
Jeremy concluded,
‘We are merely at the beginning of the broader shift that stablecoins and blockchain technology will instigate within the financial sector, allowing further fundamental innovations through the programmability of digital dollars and smart contracts, resulting in substantial transformations in how markets, capital, payments, and commerce will operate in the upcoming decade. Establishing regulatory frameworks, paired with open, interoperable industry standards, is crucial for maintaining the leadership position of the United States and the U.S. dollar in the global economic landscape.’
