On January 4, 2021, the Office of the Comptroller of the Currency (OCC) published Interpretive Letter 1174 which clarifies that national banks’ and federal savings associations’ have the authority to participate in independent node verification networks (INVN) and to use stablecoins to conduct payment activities and other bank-permissible functions. Therefore, according to the OOC, banks may use new technologies, including independent node verification networks (INVNs) and stablecoins, to perform bank-permissible functions, such as payment activities. A bank may use stablecoins (cryptocurrencies designed to minimize the price volatility) to facilitate payment transactions for customers.
The OCC’s letter states that a national bank or federal savings association may validate, store, and record payments transactions by serving as a node on an INVN. Similarly, a bank may use INVNs and related stablecoins to carry out other permissible payment activities. In deploying these technologies, a bank must comply with applicable law and safe, sound, and fair banking practices. While the OCC’s approval added to the surge of investor interest in cryptocurrency, the guidance does not cover decentralized assets like bitcoin. Rather, the lifting of perceived restrictions is linked to regulatory-approved bank-issued coins and central bank digital currencies.
This interpretive letter and major shift for the banking industry comes nearly a month after Members of the US Congress proposed the Stablecoin Tethering and Bank Licensing Enforcement (STABLE Act) to increase the oversight and regulation of existing stablecoin issuers, potential stablecoin issuers, and stablecoin-related service providers. The STABLE Act seeks to provide consumer protection to unbanked and underbanked communities from fair lending risk and other consumer protection challenges such as disparate impact, predatory lending, and digital redlining. It is unclear whether the Biden Administration, including the possibility of a new OCC chair, will have any impact on this interpretive letter, and whether the House and Senate will shift in any way to have an impact on the passage of the STABLE Act.