On September 21, 2020, the Office of the Comptroller of the Currency (“OCC”) published a letter addressing the authority of nationals banks to hold deposits that serve as reserves for stablecoins, which is a type of cryptocurrency designed to have a stable value. The OCC concludes that national banks and federal savings associations may engage in certain stablecoin activities as described in the letter.
In the news release announcing the OCC’s position, Acting Comptroller of the Currency Brian P. Brooks acknowledged that “National banks and federal savings associations currently engage in stablecoin-related activities involving billions of dollars each day.” He explained that this interpretive letter would provide “greater regulatory certainty for banks within the federal banking system to provide those client services in a safe and sound manner.”
In particular, the letter is designed to address some of the many questions from national banks regarding the application of stablecoin-related activities. In concluding that banks may hold reserves for issuers of stablecoins, the OCC notes that the letter applies only in situations where the cryptographic keys enabling access to the stablecoins are held in a hosted wallet, i.e., stored online by an identifiable third party. In addition, the letter applies only to the use of stablecoins backed by a single fiat currency on a 1:1 ratio in which the bank verifies at least daily that reserve account balances are equal to or greater than the number of the issuer’s outstanding stablecoins.
The legal basis for the letter’s conclusion is that holding reserves backing stablecoins falls squarely within the statutory authorization to take deposits. The letter also reminds institutions of their compliance and risk management obligations. It explains that a “bank providing services in support of a stablecoin project must comply with all applicable laws and regulations and ensure that it has instituted appropriate controls and conducted sufficient due diligence commensurate with the risks associated with maintaining a relationship with a stablecoin issuer.” And the letter notes that this “due diligence process should facilitate an understanding of the risks of cryptocurrency and include a review for compliance with applicable laws and regulations, including those related to the Bank Secrecy Act (BSA) and anti-money laundering.”