EDITOR NOTE: The Office of the Comptroller of Currency just gave banks the regulatory green light to begin using “stablecoins” for financial settlements and transactions. Stablecoins are bank-issued digital currencies--highly centralized, and pegged to the fiat system. Strangely, some cryptocurrency enthusiasts see this as a starting point for decentralized cryptocurrency inclusion; hoping that, given some time, the government will allow decentralized currencies to enter the financial system. Others criticize it as a rash move that’s largely ignorant of the technological and cybersecurity risks it may introduce into an otherwise stable process. We see it as an escalation in the War on Cash, a digital enhancement of the fiat system wherein monetary manipulation can take place with greater speed, ease.and efficiency, and all transactions are subject to surveillance. What’s at stake is not only your financial privacy but the value of your money. And the only way to hedge against its risks is to take your money out of the system by converting a portion of your cash to non-CUSIP gold and silver.
Top US banking regulator, the Office of the Comptroller of the Currency, has approved the use of stablecoins for the settlement of financial transactions by banks.
The OCC guidance clears the way for banks to participate in independent node verification networks (INVN) and use stablecoins to conduct payment activities and other bank-permissible functions.
Acting Comptroller of the Currency Brian P. Brooks, says: “The President’s Working Group on Financial Markets 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.”
The agency letter concludes a national bank or federal savings association may validate, store, and record payments transactions by serving as a node on an INVN. Likewise, a bank may use INVNs and related stablecoins to carry out other permissible payment activities.
While the OCC's approval added to the surge of investor interest in cryptocurrency, the guidance does not cover decentralised assets like bitcoin. Rather, the lifting of perceived restrictions is linked to regulatory-approved bank-issued coins and central bank digitial currencies.
In a Twitter thread, Ciricle co-founder Jeremy Allaire hailed the OCC's letter as a huge win for the cryptocurrency industry.
3/ 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.
— Jeremy Allaire (@jerallaire) January 4, 2021
5/ 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.
— Jeremy Allaire (@jerallaire) January 4, 2021
An alternative take comes from Anglea Walch, a professor at Mary’s University School of Law in San Antonio, Texas and research associate at UCL Centre for Blockchain Technologies
Fundamentally, though, this new guidance buys into the myths about public blockchains, fails to address the governance/operational risks I've been discussing for years, & erases any walls left protecting the mainstream financial system from #crypto systems.
— Angela Walch (@angela_walch) January 5, 2021
Originally posted on Finextra
