The U.S. Office of the Comptroller of the Currency has issued its first official guidance on stablecoins – cryptocurrency that is valued and linked to traditional currency holdings. The guidance is potentially game-changing given that it confirms that U.S. banks can provide services to stablecoin issuers in the U.S.
Banks are already providing services to stablecoin issuers but as with various parts of the unregulated cryptocurrency space, there has always been the concern that doing so could potentially be illegal. Under existing law, as determined by the OCC, the legality of doing so has now been made clear.
“National banks and federal savings associations currently engage in stablecoin related activities involving billions of dollars each day,” acting Comptroller of the Currency Brian Brooks said 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.”
In a six-page long interpretative statement, the OCC detailed exactly what was meant by the ruling. On page one the notable part is that the ruling only applies to stablecoins backed on a 1:1 basis by a single fiat currency. “A bank providing services in support of a stablecoin project must comply with all applicable laws and regulations and ensure that it has instituted appropriate controls and conducted sufficient due diligence commensurate with the risks associated with maintaining a relationship with a stablecoin issuer,” the letter reads.
While good news for stablecoin issuers, the “single fiat currency” part may complicate things for Facebook Inc. with their Libra project. The latest incarnation of Facebook’s long-planned online kind-off cryptocurrency was said to be based on Facebook having multiple currencies deposited in support for the Libra currency itself.
The latest time SiliconANGLE reported on Libra was in May and where the project is at this point of time is open to speculation. According to Reuters, Libra appointed former HSBC Holdings plc European head James Emmett to lead Libra’s operational unit Sept. 17. Exactly what he’s operating is not clear given that Libra still hasn’t launched despite Facebook’s grand initial plans with the fanfare and controversy to match in 2019.