Victor Ugochukwu · Dec 14, 2020 . 5min read
OCC issues guidelines, gives Banks a green signal to accept Stablecoin reserve deposits
Any national bank in the United States can receive stablecoins reserve deposits on behalf of an issuer as a legitimate banking service.
By Victor Ugochukwu · Sep 22, 2020 . 7min read
The Office of the Comptroller of Currency – OCC has issued guidelines clarifying that any national bank in the United States can receive stablecoins reserve deposits on behalf of an issuer as a legitimate banking service.
Jonathan V. Gould, the Senior Deputy Comptroller and Chief Counsel of the OCC stated this in a recent letter. He said that a national bank might hold stablecoin “reserves”. This, of course, means as a service to customers if stablecoin issuers desire to place assets in a reserve account.
However, the letter explicitly stated that national banks might do this provided that there is
assurance that the issuer has sufficient assets backing the stablecoin in situations where there is a hosted wallet
Additionally, the OCC guideline says any bank accepting reserves from stablecoin issuers must comply with all applicable laws and regulations. These laws include the Bank Secrecy Act (BSA) and anti-money laundering regulations.
Recall earlier, that we reported on OCC giving banks the green light in the United States to start providing custody services to any interested cryptocurrency entity. Many of the cryptocurrency exchanges may have tried to use banking services and were denied. For some of the crypto entities the banks rejected to offer their services, it may have been because of unclear regulatory policies.
Also, OCC recognizes cryptocurrencies’ inherent volatility and the fact that even stablecoins sometimes shoot below or above their peg. As such, it expects all banks to manage liquidity risks properly. It advises banks to do this with sophistication equal to the risks undertaken and complexity of exposures.
OCC’s guidelines for banks on reserve deposits provides more impetus for an already exploding stablecoins growth
As stablecoins continue to see increased adoption in 2020, OCC guidelines to banks for stablecoin reserve deposits should drive in more energy for further growth. One person who shares this same sentiment is Jeremy Allaire Circle’s CEO and issuer of the USD Coin, a stablecoin. Excited about this latest development, Jeremy Allaire in a recent post said,
With this clarity from the US Treasury Department around the standards for banks to hold reserves on behalf of stablecoin issuers, businesses of all sizes, fintech firms and banks can have more confidence in building on this innovation, while also ensuring that the guardrails and risk management expected from the US banking system can be applied to this new age of internet money.
Jeremy’s enthusiasm does not come as a surprise as USDC keeps growing at an exponential rate this year. For instance, USDC supply doubled in August, and it is also staked across many DeFi protocols. Tether, on the other hand, has grown massively and now boasts of more than $15 billion in market cap.
Follow Cryptodose for daily updates.