A federal financial regulator is informing US banks that they can adopt new technologies such as stablecoins for their payment functions.
In a new letter offering guidance to financial institutions, Jonathan Gould of the Office of the Comptroller of the Currency (OCC) says banks can use stablecoins for payments while serving as a node on an independent node verification networks (INVN).
“INVNs and related stablecoins represent new technological means of carrying out bank-permissible payment activities. We therefore conclude that a bank may validate, store, and record payments transactions by serving as a node on an INVN. Likewise, a bank may use INVNs and related stablecoins to carry out other permissible payment activities.”
The OCC says banks may buy and sell stablecoins as well as issue their own coins to facilitate payments. The largest dollar-pegged stablecoin currently is Tether (USDT) with a market capitalization of over $22 billion. USD Coin (USDC) follows with a market cap of over $4 billion.
The OCC adds that any stablecoin arrangement that a bank chooses to engage itself in must fulfill Know Your Customer and Anti-Money Laundering policy requirements.
“… stablecoin arrangements ‘should have the capability to obtain and verify the identity of all transacting parties, including for those using unhosted wallets.’”
Gould says the benefits of stablecoins and independent node verification networks include enhancing efficiency, effectiveness and resiliency of payments provision.
He also warns of the demerits, saying that the use of cryptocurrencies in payment services increases compliance risks.