OCC, a subsidiary of the US Treasury Department: Allows the Federal Bank to use stable currency for settlement and issuance of stable currency
On January 5, the Office of the Comptroller of the Currency (OCC) issued an explanatory letter stating that the Commonwealth Bank and the Federal Reserve Association can use public blockchains and stablecoins for settlement.
Note: OCC is affiliated to the U.S. Department of the Treasury and is one of the five main regulatory agencies of the U.S. federal government. It is mainly responsible for issuing licenses and supervising federal banks.
OCC pointed out that as long as it complies with laws and good banking practices, “the Federal Bank or the Federal Reserve Association can verify, store, and record payment transactions by acting as nodes on the Independent Node Verification Network (INVN). Similarly, banks can use stablecoins to facilitate Customers verify payment transactions on the network at independent nodes, including the issuance of stable coins and the exchange of stable coins for legal tender.
The regulatory agency cited as an example that one entity (payer) may want to remit U.S. dollar payments to another entity (payee). The payer does not use a centralized payment system, but converts U.S. dollars into stable coins and transfers the stable coins to the payee through INVN. The recipient then converts the stable currency back to U.S. dollars. In a common use case in reality, payments are cross-border remittances. “
Decrypt pointed out that the OCC letter clearly shows that as financial intermediaries, banks face competition in accelerating capital flows. In OCC’s view, INVN, such as blockchain and other distributed ledger technologies, is an effective and rapid way to transfer funds.
In this regard, the stablecoin USDC issuer Circle Joint Creation Jeremy Allaire tweeted, “This is a huge victory for cryptocurrencies and stablecoins. Because according to the letter of explanation, banks can treat public chains as similar to SWIFT and ACH. It has the same financial infrastructure as FedWire and treats stablecoins (such as USDC) as electronic storage of value. This importance cannot be underestimated.”
“We are moving on the path of implementing all major economic activities on the chain. It is great to see the forward thinking support provided by the largest national banking regulator in the United States.”
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