Top Regulator Says US Banks Can Hold Stablecoin Reserves

September 23, 2020

The Office of the Comptroller of the Currency says that federally regulated banks can continue holding stablecoin reserves from institutions provided that some regulatory conditions are met.

In an interpretative letter signed by Senior Deputy Comptroller Jonathan Gould, the OCC provides the first national guidelines on how cryptocurrencies backed by fiat should be regulated. By recognizing that holding deposits is a core banking activity, the OCC expressly reassures banks and Federal Savings Associations (FSAs) that they can continue receiving and holding stablecoin reserves on behalf of issuers.

“As the OCC recently reaffirmed, national banks may provide permissible banking services to any lawful business they choose, including cryptocurrency businesses, so long as they effectively manage the risks and comply with applicable law, including those relating to the BSA and anti-money laundering.”

Banks and FSAs are not only required to abide by laws and regulations regarding deposit insurance coverage and anti-money laundering, but are also required to exercise due diligence in risk management, including applying mechanisms to ensure that the issuers have sufficient assets to back their deposits.

“The bank should have appropriate agreements in place with an issuer to verify and ensure that the deposit balances held by the bank for the issuer are always equal to or greater than the number of outstanding stablecoins issued by the issuer. Such agreements should include mechanisms to allow the bank to verify the number of outstanding stablecoins on a regular basis.”

The letter specifies that the guidance only applies to stablecoins backed one-to-one with a currency and stablecoins held in hosted wallets controlled by a licensed third party. Tokens like Saga, versions of Libra, and stablecoins in unhosted wallets controlled by individual users are excluded from the guidelines.

Until recently, national banks and FSAs have been engaging in stablecoin activities worth billions of dollars every day within an unclear regulatory environment. Acting Comptroller of the Currency, Brian P. Brooks, says in a statement,

“This opinion provides greater regulatory certainty for banks within the federal banking system to provide those client services in a safe and sound manner.”

The move comes after the OCC issued similar guidelines permitting banks to hold crypto assets in July.

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