On Monday, the Office of the Comptroller of the Currency or OCC along with the SEC came up with stablecoin guidance. This guidance aims to provide the first-ever guidance on how cryptocurrencies are supported by fiat currencies and should be treated under law.
Issuers of stablecoin have been making use of US banks for years but the regulatory environment was always shaky. OCC now demands regulated banks to provide their services to stablecoin issuers without the need to get less confident about doing so in a press release. There was also an accompanying interpretive letter which was signed by Senior Deputy Comptroller Jonathan Gould, explaining that banks should not forgo the due diligence process and full-proof risk measures before they decide to bank any stablecoin issuer.
Brian Brooks who is the acting Comptroller of the Currency says,
“National banks and federal savings associations currently engage in stablecoin related activities involving billions of dollars each day. This opinion provides greater regulatory certainty for banks within the federal banking system to provide those client services in a safe and sound manner.”
Jeremy Allaire, CEO of CENTRE member Circlehas said that presently the USDC issuers have to begin with reserve banks and each member has to necessarily hold an account at each of these banks.
“I can’t speak on behalf of other stablecoins but at CENTRE we’ve seen really robust demand from significant banking institutions to get involved in reserve banking stablecoin clients,” he added
OCC has given meticulous details about how banks should be handling the reserves, especially those stablecoins that are backed by dollars. OCC has been working over a period to integrate crypto with prevalent banking order. OCC in recent months has even implied to banks that they can provide services to crypto startups. It also has floated a national payment charter for exchanges.
The interpretive letter specifies that stablecoin issuers can point to the regulated banks to hold their reserve to convince the audience of the safety. It also clearly establishes that by stablecoints it only means those held in hosted wallets controlled by a trusted 3rd party. Those wallets which are controlled by individual users and are unhosted are not included in the Monday’s announcement.
The letter said:
“The due diligence process should facilitate an understanding of the risks of cryptocurrency and include a review for compliance with applicable laws and regulations, including those related to the Bank Secrecy Act (BSA) and anti-money laundering. Stablecoin reserve accounts could be structured as either deposits of the stablecoin issuer or as deposits of the individual stablecoin holder if the requirements for pass through insurance are met.”
SEC further said that certain stablecoins might not come under securities under federal law but has advised issuers to work with legal counsel to ensure it happens. It is willing to publish a no-action letter that would assure the recipient that the regulator will not enforce action against the company.
“Whether a particular digital asset, including a so-called “stablecoin,” is a security under the federal securities laws is inherently a facts and circumstances determination. This determination requires a careful analysis of the nature of the instrument, including the rights it purports to convey, and how it is offered and sold,” the SEC said.