US banking regulator recently authorized federal banks in the country to hold stablecoin reserves. A Monday letter from the US Office of the Comptroller of the Currency (OCC) has signaled towards a new range of crypto related changes for national banks.
What does the letter say?
The letter reads,
“We conclude that a national bank may hold such stablecoin ‘reserves’ as a service to bank customers.”
Brian Brooks, the Acting Comptroller of the Currency, noted that banks are already making stablecoins a part of their activities. He stated,
“National banks and federal savings associations currently engage in stablecoin related activities involving billions of dollars each day.”
The Office has been clear on the fact that only stablecoins pegged 1:1 to a fiat currency will be allowed as reserves in national banks. Stablecoin that are connected with a basket of currencies like Libra and Saga could be excluded from this list. Tether could be one example of a stablecoin pegged 1:1 to USD. It is also the largest stablecoin in the market but has been marred in controversy over the years. It has been named in crypto price manipulation scams and is currently fighting a legal battle with the New York AG over a loan given to its sister concern, crypto exchange Bitfinex, to help cover its multi-million-dollar losses.
OCC becoming more crypto friendly
Brian Brooks is the former head of the legal department at Coinbase. Since he joined OCC has its acting head in March this year, he has been working to expand the crypto capabilities of American banks. In July, the OCC stated that the federal banks can start providing custody for crypto assets. In both its orders, the OCC has maintained that crypto-focused entities can only be carried out if the banks comply with know your customer (KYC), anti-money laundering (AML), and other federal requirements as they normally would.
It also warned investors to do a proper risk assessment and liquidity, compliance checks before entering into a relationship with a crypto company.