US federal banking regulator said in an evaluative letter that U.S. financial institutions are permitted to use stablecoins for payment activities and can participate as nodes in a blockchain. What it means is that a bank can issue stablecoins, exchange fiat currency stablecoins and verify, store, record payment transactions by serving as a node on a blockchain (INVN).
Stablecoins are a category of cryptocurrencies that are connected to a reserve asset for value and stability. A fiat currency such as the dollar, the euro, the yuan or a commodity such as gold can be a reserve asset. Stablecoins for example are Tether, USD Coin, Dai, Facebook’s Diem (Libra).
Jeremy Allaire, Co-founder & CEO of Circle @circlepay said via twitter
10/ This is a HUGE way to start 2021, the year that crypto and stablecoins go mass market!
— Jeremy Allaire (@jerallaire) January 4, 2021
A letter was issued by the Office of the Comptroller of the Currency (OCC) clarifying the authority of national banks and federal savings associations to participate in independent node verification (INVN) networks and to use stablecoins to perform payment activities and other bank-permitted functions.
“While governments in other countries have built real-time payments systems, the United States has relied on our innovation sector to deliver real-time payments technologies. Some of those technologies are built and managed by bank consortia and some are based on independent node verification networks such as blockchains,” said Acting Comptroller of the Currency Brian P. Brooks. “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.”
This step basically positions blockchain networks at the same level as worldwide financial networks such as SWIFT, ACH and FedWire, the Blockchain Association lobbyist community said in a tweet,
2/ The letter states that blockchains have the same status as other global financial networks, such as SWIFT, ACH, and FedWire.
This is a giant advance for crypto because it paves the way for these networks to be a formal part of the US financial infrastructure.
— Blockchain Association (@BlockchainAssn) January 4, 2021
The OCC letter stated that banks should be mindful of possible threats including fraud, there by extending their regulatory procedures to resolve the particular risks of crypto-currency transactions, they should protect against money laundering and terrorist financing.
Nic Carter, Partner of Castle Island Ventures added, this will allow banks “to take advantage of the always-on features of public blockchains.” Carter cautioned, “I don’t see stablecoins imminently replacing traditional financial rails, but this is a vital first step in normalizing the notion of public blockchains as an alternative settlement infrastructure that banks can freely adopt.”
More info on Stablecoins click the link Fyggex (About stablecoins)
— Fyggex (@fyggexchange) August 12, 2020
Image: Megan Rexazin
*Disclaimer: Fyggex, does not give any guidance, advice or recommendations to neither invest or not in any available normal currency or cryptocurrency directly or indirectly via any trading platform, exchange or provider. Our sole purpose is to make you aware of the related real or potential risks and opportunities so that you can make your own research prior to any financial decisions you may want to take. Past performance and position are not a guarantee of risk-free future returns.