Earlier this week, the US Office of the Comptroller of the Currency(OCC) issued guidelines to govern transactions of stablecoins in banks. The move cements the allowance for national banks to provide stablecoin services to US citizens. The US Security and Exchanges Commission(SEC) was also involved in making the guidelines mentioned above.
The regulations on the detailed statement show how fiat-backed cryptocurrencies should get handled under federal law. This year, the OCC’s Chief Counsel released a letter permitting banks to use stablecoins for payment services. However, it was not clear under which circumstances banks were permitted to use the digital assets.
The OCC’s letter stated that banks offering such services should comply with anti-money laundering regulations and exercise KYC protocol.
The OCC’s View on Stablecoins
Fiat-backed digital assets have been around the US banking systems for quite a while, although in the absence of regulations. In a recent press release, the federal regulator implored banks to include stablecoin issuers’ services in their portfolio.
The regulatory body also released another letter, which stated several benefits for including stablecoins in banks. It also shed light on the growth in the digital assets’ popularity by stating they are becoming ‘increasingly popular.’ However, the letter specified that the assets used should strictly be those backed on a one to one ratio with fiat currencies.
OCC is urging federal regulated banks to be wary of the risks in stablecoin banking. It requires the financial institutions to conduct due diligence on the risks while remaining compliant with the Bank Secrecy Act (BSA).
The given regulations only addressed stablecoins held in wallets controlled by a genuinely trusted third party`. On the eligibility of the potential clients for stablecoins services, the OCC’s letter stated, “A national bank or FSA must also identify and verify the beneficial owners of legal entity customers opening accounts.”
The US SEC mentioned that some stablecoins might not be regarded as securities, but banks should consult the watchdog for confirmation. The SEC is currently on an ongoing court case with Ripple for not following security exchange regulations. The US financial watchdog asked banks to work with FinHub to ensure the services they provide comply.
The Call For Regulations is Finally Heard
In June 2020, OCC issued an ANPR, which requested the general public’s opinions on how crypto services can be provided in the banking sector. Later on in the year, several individuals urged the OCC to provide regulations for the inclusion of cryptocurrency in the financial sector. Multiple banks were interested in the possibility that they could provide cryptocurrency services to their clients.
Coinbase VP Juan Saurez shared his opinion on the matter, saying the financial regulator should direct banks in permissible activities involving cryptocurrency. Fortunately, after the recent announcement, financial institutions may legally launch the provision of crypto services.