- The Office of the Comptroller of the Currency (OCC) authorised cryptocurrency custody to banks
- The use of independent node verification networks (INVNs) and stable coins have also been permitted
- This innovative guidance will allow cryptocurrency businesses to rely on banking partners for payment activities
- The OCC letter also outlines the distinction between custodial services for cryptocurrency and fiat money
A New Association Between Banking and Cryptocurrency
The OCC’s Interpretive Letter 1174 has provided an opportunity for the cryptocurrency industry to utilise banking and custodial services. This guidance elucidates the legal permissibility of activities related to payment, which are inclusive of INVNs and stable coins, that will come under the authority of banks henceforth.
The banks will now be able to “validate, store, and record payments transactions by serving as a node on an INVN” according to the letter. They have also been authorised to provide custodial services and fiat bank accounts to businesses in the cryptocurrency industry.
Transition From the Traditional Functioning of Banks
This novel authority of banks will serve as a safeguard for customers with valuable cryptocurrency assets. The regulation and safety provided by the banking system will ensure that customer assets are secure, along with fast tracking the process of transactions including cross-border payments. This will also transform the way in which the cryptocurrency industry is viewed currently.
Cryptocurrency Guidance : A Positive Development
This integration is serving to be a positive regulatory news for investors. Post-release, the letter has caused a 12% jump for Ethereum in the crypto market. It will also reflect on normalizing the use of cryptocurrencies and the adaptation of new technology in these changing times. The letter also serves as a response to the recent statement made by the President’s Working Group on Financial Markets, which highlighted the possible risks and limitations of “multi-currency stable coins.”
Acting Comptroller of the OCC, Brian Brooks quoted that the 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.”
All activities carried out by banks, however, will be reviewed by the OCC as part of its ordinary supervisory processes.
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