National Banks & FSAs Can Hold Reserves for Stablecoin Issuers: US Federal Banking Regulator & SEC
The Office of the Comptroller of the Currency (OCC) issued new guidance regarding stablecoins on Monday.
“National banks and federal savings associations currently engage in stablecoin-related activities involving billions of dollars each day,” said Acting Comptroller of the Currency Brian P. Brooks.
“This opinion provides greater regulatory certainty for banks within the federal banking system to provide those client services in a safe and sound manner.”
As per the letter from the US federal banking regulator, national banks and federal savings associations (FSA) are allowed to hold “reserves” on behalf of their customers who issue stablecoins, and those coins are held in hosted wallets, those controlled by a trusted third party.
This means unhosted wallets, which are controlled by the individual user who owns the cryptos being stored, are not part of this announcement.
The SEC also issued a response to OCC’s guidance, in which it says whether a stablecoin is security will depend on “facts and circumstances determination,” which will require the analysis of the instrument.
The regulator asked the market participants to structure and sell a digital asset in such a way that “it does not constitute a security and implicate the registration, reporting, and other requirements of the federal securities laws.”
Jeremy Allaire, the co-founder and CEO of Circle, which along with Coinbase, has launched its own stablecoins called USD Coin (USDC), called this a “significant progress for the advancement of digital dollar stablecoins in the US financial system.”
This will “help the United States and the US dollar to continue its leadership role in the world economic system,” he said.
According to him, national banks allowing to hold reserves for fiat-backed stablecoins will provide businesses, fintech firms, and banks have “more confidence in building on this innovation.”
In 2020, stablecoins have exploded, currently around $20 billion, with Tether (USDT) accounting for more than $15.5 billion of it and USDC with 500% growth YTD $2.3 billion.
Market participants see it as bullish news, with one trader commenting, “Basically enables a LOT more money to funnel into crypto, if stablecoin providers don’t have to scramble for banks to hold the reserves.”