SEC and OCC Issue First Regulatory Clarifications for Stablecoins
The US Office of the Comptroller of the Currency (OCC) has released new guidance, officially clarifying that domestic banks can provide services to stablecoin issuers in the US.
The Office of the Comptroller of the Currency (OCC) and the Securities and Exchange Commission (SEC) released the stablecoin guide this Monday, providing the first detailed national guide on how cryptocurrencies backed by fiat currencies should be treated under the law. Before Monday’s announcements, there was no federal clarity on stablecoins.
Stablecoin issuers have been using US banks for years, but in an unclear regulatory environment. Now, the OCC wants federally regulated banks to feel comfortable serving stablecoin issuers, it said in a press release. An accompanying interpretive letter, signed by Senior Vice President Jonathan Gould, explained that while banks must conduct due diligence and ensure they assess the banking risks of any stablecoin issuer, stablecoins are becoming increasingly popular.
The letter specifies that it refers to stablecoins backed one to one by fiat currencies.
“National banks and federal savings associations are currently engaged in stablecoin-related activities involving billions of dollars every day. This opinion provides greater regulatory certainty for banks within the federal banking system to provide those services to clients in a safe and robust manner, ”said Acting Comptroller of the Currency Brian Brooks in a statement.
Jeremy Allaire, CEO of CENTER member Circle, told CoinDesk in March that USDC issuers must currently join reserve banks, and each member has an account with these banks.
“I can’t speak on behalf of other stablecoins, but at CENTER we have seen really strong demand from major banking institutions to engage with reserve banking stablecoin clients,” he said at the time.
The OCC detailed how banks should manage stablecoin reserves, specifically referring to stablecoins backed by currencies like the dollar.
The OCC has taken a series of steps to integrate the crypto space with the existing financial system under Brooks, who is the former general counsel for Coinbase. In recent months, the OCC has told banks that they can provide services to crypto startups and has submitted a national payment letter for exchanges and other fintech companies.
According to the letter, stablecoin issuers can point to the fact that regulated banks hold their reserves to convince the general public that they are safe.
The letter specifies that the OCC guidance only refers to stablecoins kept in hosted wallets, that is, wallets controlled by a trusted third party. Non-hosted wallets, which are controlled by the individual user who owns the cryptocurrencies being stored, are not included in this Monday’s announcement.
“The due diligence process should facilitate understanding of the risks of cryptocurrency and include a review of compliance with applicable Laws and regulations, including those related to the Bank Secrecy Act (BSA) and the fight against money laundering.” said the interpretive letter from the OCC.
This due diligence also includes compliance with the Patriot Act.
“Stablecoin reserve accounts could be structured as deposits from the stablecoin issuer or as deposits from the individual stablecoin holder if the requirements for transfer insurance are met,” the letter explains.
Additionally, the U.S. Securities and Exchange Commission (SEC) said that certain stablecoins might not be securities under Federal Law, but recommended that issuers work with the agency and legal counsel to ensure this is the case. . According to the statement, the SEC is willing to publish a “no action” letter, which would assure the recipient that the regulator would not initiate legal action against the company.
“Whether a particular digital asset, including a so-called“ stablecoin ”, is a security under federal securities laws, it is inherently a determination of facts and circumstances. This determination requires a careful analysis of the nature of the instrument, including the rights it purports to convey, and how it is offered and sold, ”the SEC said.
Monday’s statements would appear to apply only to fiat-backed stablecoins, not algorithmic ones like MakerDAO’s DAI. Basis, another stablecoin startup that raised $ 133 million in 2018, closed that December after its lawyers concluded that the specific mechanism for its token would be treated as securities under US law.
The SEC’s crypto czar Valerie Sczcepanik said the same thing during last year’s SXSW.
“You may be entering the land of security” with algorithmic stablecoins, it said in March 2019. This was said by the SEC on Monday.
Disclaimer: This press release is for informational purposes information does not constitute investment advice or an offer to invest. The views expressed in this article are those of the author and do not necessarily represent the views of infocoin, and should not be attributed to, Infocoin.