The Office of the Comptroller of the Currency (OCC) bureau of the U.S. Department of the Treasury said that banks and federal savings associations can use stablecoins and independent node verification networks (INVNs), otherwise known as blockchain networks, to perform payment activities and perform permissible bank functions.
In an interpretive letter dated Jan. 4, the OCC clarified that banks can connect to blockchain networks as validator nodes and use stablecoins to facilitate payment transactions for customers.
The federal banking regulator added that the use of INVNs in the federal banking system could also improve the efficiency, effectiveness, and stability of payment activities and enable real-time payments that other countries already enjoy.
“Such activities may be more resilient than other payment networks because of the decentralized nature of INVNs, which allows a comparatively large number of nodes to verify transactions in a trusted manner. An INVN also limits tampering or adding inaccurate information to the database because information is only added to the network after consensus is reached among the nodes validating the information,” the letter reads.
The OCC, however, warned of the risks associated with INVN-related activities, citing that these new technologies entail sufficient technological expertise to ensure safe risk management.
Huge win for the crypto space
Global financial technology firm Circle’s CEO Jeremy Allaire said that OCC’s clarification on the use of stablecoins and blockchain networks for payment activities is a big win for the crypto space.
“The new interpretive letter establishes that banks can treat public chains as infrastructure similar to SWIFT, ACH and FedWire, and stablecoins like USDC as electronic stored value. The significance of this can’t be understated,” he tweeted.
Allaire said that the new guidance could make leading stablecoins such as the USDC become a mainstream payment medium. He said that this could also make the United States a leader in blockchain adoption.
“We are on a path towards all major economic activity being executed on-chain. It is tremendous to see such forward-thinking support from the largest regulator of national banks in the United States,” he said.