OCC: National Banks and Federal S&Ls May Use Stablecoins for Payment Activities

The Office of the Comptroller of the Currency (OCC) says that national banks and federal savings associations can participate in “independent node verification networks” (INVN) and use stablecoins to conduct payment activities and other bank-permissible functions, according to an interpretive letter posted by the bank regulator.

Acting Comptroller of the Currency Brian P. Brooks issued the following statement:

“While governments in other countries have built real-time payments systems, the United States has relied on our innovation sector to deliver real-time payments technologies. Some of those technologies are built and managed by bank consortia and some are based on independent node verification networks such as blockchains. The President’s Working Group on Financial Markets (PWG) recently articulated a strong framework for ushering in an era of stablecoin-based financial infrastructure, identifying important risks while allowing those risks to be managed in a technology-agnostic way. Our letter removes any legal uncertainty about the authority of banks to connect to blockchains as validator nodes and thereby transact stablecoin payments on behalf of customers who are increasingly demanding the speed, efficiency, interoperability, and low cost associated with these products.”

Last month, the PWG issued a statement that responsible innovation must exist in line with existing law, while commenting on stablecoins. At that time, a US Department of Treasury representative said the PWG statement reflects a commitment to both promote the important benefits of innovation and to achieve critical objectives related to national security and financial stability.

The OCC concludes a national bank or federal savings association may validate, store, and record payments transactions by serving as a node on an INVN.

Additionally, a national bank may use INVNs and related stablecoins to carry out other permissible payment activities. In deploying these technologies, a bank must comply with applicable law and safe, sound, and fair banking practices.

The OCC continues to explain that by engaging in INVN the federal banking system may improve the efficiency and stability of payments while benefiting from real-time payments similar to what other countries already experience.

The OCC states:

“[These] 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 OCC adds that banks must be aware of possible risks including operational challenges and compliance risks or potential fraud.

The letter notes:

“A bank may validate, store, and record payments transactions by serving as a node on an INVN and use INVNs and related stablecoins to carry out other bank-permissible payment activities, consistent with applicable law and safe and sound banking practices. A bank should consult with OCC supervisors, as appropriate, prior to engaging in these payment activities. The OCC will review these activities as part of its ordinary supervisory processes.”

Banks must guard against potential money laundering activities and terrorist financing by adapting and expanding their compliance programs to ensure compliance with the reporting and recordkeeping requirements of the Bank Secrecy Act and to address the particular risks of cryptocurrency transactions.


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