Is blockchain coming to your bank?

The OCC will allow chartered banks to use stablecoins.


January 8, 2021

On Wednesday evening, the collective value of all cryptocurrencies crossed $1T (with a frickin “T”). And on Thursday, Bitcoin, the most prominent coin, hit $40k — 2x its price from just a month ago.

While these are huge milestones for the industry, it may not even be the most consequential ones of the week.

The Office of the Comptroller of the Currency (OCC) — a bank-regulating bureau within the Treasury Department — has issued guidance saying banks may adopt certain blockchain technologies.

Specifically, chartered banks can deploy stablecoins, which are more… er… stable than other crypto because they’re pegged to other assets.

The OCC has been very forward-looking on payments…

… since a former Coinbase executive, Brian Brooks, took over the bureau in May 2020.

According to Forbes, Brooks has previously:

  • Issued guidance allowing banks to custody cryptocurrencies
  • Created a special payment charter for fintech firms

One DC lawyer said the OCC was similarly ahead of the pack on internet banking, and the latest guidance (AKA an interpretative letter) will help make crypto more mainstream.

What does this really mean?

Jeremy Allaire, CEO of blockchain payments startup Circle, says the OCC’s move is important because it:

  • Allows banks to treat blockchain like other payments infrastructure (e.g., SWIFT, ACH)
  • Enables banks to use decentralized and faster settlement technology
  • Creates a path for the US to create its own digital currency (AKA a “USDC”)

Furtner, Forbes notes that there’s a huge opportunity to improve the speed of cross-border transactions if US banks deploy blockchain.

The changes are happening too fast for some

In November, 6 members of Congress criticized the OCC for moving “unilaterally” on crypto regulation.

The OCC itself acknowledges that banks must expand “compliance programs” to deal with any blockchain-related transactions.

Meanwhile, another US bureau with the Treasury Department, the Financial Crimes Enforcement Network (FinCEN), released more stringent rules on data collection for digital wallets.

Crypto is moving fast, but there are still some hurdles to clear until the next trillion (with a frickin’ “T”) in market value is created.

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