National banks may process stablecoin payments, OCC says

WASHINGTON — National banks may use stablecoins and distributed-ledger technologies to process payments, the Office of the Comptroller of the Currency said.

The agency issued an interpretive letter Monday that addresses national banks’ use of “independent node verification networks,” or INVNs, and stablecoins. INVN is a general term used to describe a database where copies of information are shared and maintained across multiple computers, or nodes. Stablecoins are a specific form of cryptocurrency typically tied to the value of a fiat currency, such as the U.S. dollar.

While the letter said that the OCC “neither encourages nor discourages banks” from using such technologies, it emphasized that INVNs and stablecoins “may enhance the efficiency, effectiveness and stability of the provision of payments” and “may be more resilient than other payment networks because of the decentralized nature of INVNs,” according to the letter signed by Jonathan V. Gould, the OCC’s senior deputy comptroller and chief counsel.

“Over time, banks’ financial intermediation activities have evolved and adapted in response to changing economic conditions and customer needs,” Gould wrote. “The changing financial needs of the economy are well illustrated by the increasing demand in the market for faster and more efficient payments through the use of decentralized technologies, such as INVNs, which validate and record financial transactions, including stablecoin transactions.”

The letter argues that the use of decentralized payments technologies is simply the latest development in banks’ long-standing role as institutions that move around money. “Using INVNs to facilitate payments transactions represents a new means of performing banks’ permissible payments functions,” Gould wrote. “At their core, payment activities involve transmitting instructions to transfer a specified sum from one account on a ledger to another account on the same or a different ledger (either at the same bank or at different banks).”

The letter also said that banks must understand the risks associated with using cryptocurrencies in payments, including risk of fraud and anti-money-laundering concerns. “Depending on the nature of the payment activity, activities involving stablecoins could entail significant liquidity risks for banks,” Gould wrote.

The letter is the latest crypto-friendly move by acting Comptroller Brian Brooks — formerly chief legal officer of the cryptocurrency exchange Coinbase. In July, the OCC wrote in an interpretive letter that banks could legally hold cryptocurrency assets via their custody services, and in September the agency cleared banks to hold certain assets in reserve accounts tied to stablecoins.

“While governments in other countries have built real-time payments systems, the United States has relied on our innovation sector to deliver real-time payments technologies,” Brooks said in a news release that the OCC issued along with the letter. “Some of those technologies are built and managed by bank consortia, and some are based on independent node verification networks such as blockchains.”

“Our letter removes any legal uncertainty about the authority of banks to connect to blockchains as validator nodes and thereby transact stablecoin payments on behalf of customers who are increasingly demanding the speed, efficiency, interoperability and low cost associated with these products,” said Brooks, who has previously expressed skepticism of government-owned payment systems.

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