Stablecoin issuers have been using U.S. banks for years, but in an unclear regulatory environment. Now, the OCC wants federally regulated banks to feel comfortable providing services to stablecoin issuers, it said in a press release. An accompanying interpretative letter, signed by Senior Deputy Comptroller Jonathan Gould, explained that while banks should conduct due diligence and ensure they assess the risks of banking any stablecoin issuers, stablecoins are becoming increasingly popular.
The letter specifies it refers to stablecoins backed on a one-to-one basis by fiat currencies. “National banks and federal savings associations currently engage in stablecoin related activities involving billions of dollars each day. This opinion provides greater regulatory certainty for banks within the federal banking system to provide those client services in a safe and sound manner,” Acting Comptroller of the Currency Brian Brooks said in a statement.
The OCC detailed how banks should handle stablecoin reserves, specifically referring to stablecoins backed by currencies like the dollar. The OCC has taken a number of steps to integrate the crypto space with the existing financial system under Brooks, who is Coinbase’s former general counsel. In recent months, the OCC has told banks they can provide services to crypto startups and floated a national payment charter for exchanges and other fintech firms.
According to the letter, stablecoin issuers can point to the fact that regulated banks hold their reserves to convince the general public that they are safe. The letter specifies that the OCC’s guidance only refers to stablecoins held in hosted wallets, meaning wallets controlled by a trusted third party. Unhosted wallets, which are controlled by the individual user who owns the cryptos being stored, are not included in Monday’s announcement.
Further, the U.S. Securities and Exchange Commission (SEC) said certain stablecoins might not be securities under federal law, but advised issuers to work with the agency and legal counsel to ensure this is the case. According to the statement, the SEC is willing to publish a “no-action” letter, which would assure the recipient that the regulator would not bring an enforcement action against the company.
Monday’s statements would appear to apply to fiat-backed stablecoins only, not algorithmic ones. Basis, a stablecoin startup which raised $133 million in 2018, shut down that December after its lawyers concluded that the specific mechanism for its token would be treated as securities under U.S. law.