The Office of the Comptroller of the Currency (OCC), US Treasury’s independent bureau, published a letter on Monday mentioning that the banks will be able to use stablecoins to execute transactions. The cryptocurrency market did not react positively to the news as Bitcoin dipped below $30,000 following the announcement.
According to the official letter issued by the OCC, banks including Federal savings associations may participate in independent node verification networks (INVN), also known as blockchain networks, to conduct bank-permissible functions.
The recent release by the OCC outlined a controlled use of stablecoins but did not give any clarity about Bitcoin and other cryptocurrency assets. Moreover, the regulator mentioned the potential risks associated with blockchain technology and the use of stablecoins, including compliance risks and fraud.
Commenting on the recent announcement, Brian Brooks, Acting Comptroller of the Currency, said: “The President’s Working Group on Financial Markets recently articulated a strong framework for ushering in an era of stablecoin-based financial infrastructure, identifying important risks while allowing those risks to be managed in a technology-agnostic way. 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.”
Permissible Stablecoins Activities
The official announcement mentioned that banks are only allowed to carry out permissible payment activities through stabelcoins and the financial institutions participating in the blockchain transactions must comply with safe and fair banking practices. Additionally, the OCC stated that the banks must develop a sound risk management structure before implementing blockchain technology for transactions.
“This is a huge win for crypto and stablecoins. The recent 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 US in a leadership position in embracing the power of public blockchains,” Jeremy Allaire, Co-founder and CEO of Circle, said on Twitter.
The cryptocurrency market reacted negatively to the recent announcement as the world’s leading digital currency, Bitcoin dropped below $30,000 and Ethereum dipped below $1,000.