Blockchain association calls the announcement a “giant advance” for crypto
In an interpretive letter to national banks yesterday, the United States Treasury’s Office of the Comptroller of the Currency (OCC) allowed running independent nodes for distributed ledger networks.
The OCC stated that banks may use new technologies, including INVNs (Independent Node Verification Networks) and related stablecoins, to perform bank-permissible functions, such as payment activities. The announcement comes as a breather amid a great deal of uncertainty with regards to the future of stablecoins in the crypto community.
Addressing the issue, the letter stated that stable coins combine the efficiency and speed of digital currencies with the stability of existing currencies.
“Stablecoins can provide a means of transmitting value denominated in an existing currency using INVN technology. Stablecoins thus provides a means by which participants in the payment system may avail themselves of the potential advantages associated with INVNs”, the letter recommended.
The letter, however, warned the banks on the inherent cybersecurity risks in using such technology and recommended taking all possible measures to prevent fraud.
“Banks must also be aware of potential risks when conducting INVN-related activities, including operational risks, compliance risk, and fraud. New technologies require enough technological expertise to ensure banks can manage these risks in a safe and sound manner”, the letter stated.
The former leader of Coinbase’s legal team, Brian Brooks has been the Acting Comptroller of the Currency since May 2020. In his tenure, the OCC has put out several guidance letters authorising banks to be more active in crypto.
Influential lobbyist group Blockchain Association, in a Twitter thread, welcomed the announcement and pointed out that “The letter states that blockchains have the same status as other global financial networks, such as SWIFT, ACH, and FedWire”.
The association also called the announcement a “giant advance” for crypto as it paves the way for emerging networks to be a formal part of the US financial infrastructure. It added that the idea of US banks contributing to the operations of the blockchains by supporting stablecoins including Ethereum and Stellar is a major step forward.
The new advisory follows the guidance issued in December by the President’s Working Group on stablecoin operations. Brooks had then stated that the group had reached a productive balance in recognising the valuable and important role stablecoins are playing in “national and global economies and the need to ensure such financial tools do not contribute to a crime or national insecurity”.