National banks and federal savings associations can use public blockchains and stablecoins for settlement, The Office of the Comptroller of the Currency (OCC) said in an interpretive letter published late Monday.
The letter indicates that banks and savings associations can now run crypto nodes and utilize associated stablecoins for "permissible payment activities." This means banks can use public blockchains to validate, store, record and settle payment transactions as long as they're compliant with existing laws.
It also specifically mentions the use of stablecoins for transactions, saying blockchain networks can mitigate costs for cross-border transactions as a "cheaper, faster, and more efficient" means of payment. For that reason, it's empowering banks to utilize blockchains and their stablecoins for converting to and from fiat during remittances — and even issue stablecoins if they so choose.
The regulator noted:
"Likewise, a bank may use stablecoins to facilitate payment transactions for customers on an independent node verification network, including by issuing a stablecoin, and by exchanging that stablecoin for fiat currency."
As the letter notes elsewhere:
"Just as banks may buy and sell ESV as a means of converting the ESV into dollars (and vice versa) to complete customer payment transactions, banks may buy, sell, and issue stablecoin to facilitate payments. For example, one entity (payer) may wish to remit a payment of U.S. dollars to a second entity (payee). Rather than using a centralized payment system, the payer converts the U.S. dollars to stablecoin and transfers the stablecoin to the payee via the INVN. The payee then converts the stablecoin back into U.S. dollars. In one common version of this fact pattern, the payment is a cross-border remittance."
Acting Comptroller of the Currency and former Coinbase head of legal Brian Brooks said the letter is in response to a recent statement on stablecoins issued by the President's Working Group on Financial Markets. That report said regulators may consider limitations on "multi-currency stablecoins" and highlighted possible risks of one-to-one tokens.
"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 in a statement.
Last fall, the OCC said that federally chartered banks can hold reserve funds for fiat-backed stablecoin issuers, as previously reported.
Read the full letter below.