In today’s world of bitcoins and blockchain and everything cryptocurrency, the world is slowly veering away from the good old paper bills and saying hello to new, more efficient digital payment methods. And now, according to the letter recently issued by the office of the Comptroller of the Currency (OCC), banks are now permitted to use stable coins and other decentralized networks in payment settlements.
This means that banks are now officially recognizing blockchain networks and other related independent node verification networks (INVN) and can use these stable coins to enact any permissible functions. This includes storing, recording, and validating payments.
Following the OCC’s interpretive letter, stable coins, just like other Electronic Stores of Value (ESVs) like credit and debit cards, can now be legally taken as an electronic representation of the US dollar.
What Does This Mean For Banks?
Perhaps the main benefit that banks stand to gain is that, by engaging in the INVNs, the federal banking system gets to enhance efficiency, stability, and effectiveness of payments. Ultimately, the banks will gain advantages of real-time payments that other countries using these systems already enjoy.
Because of the decentralized nature of the INVNs, such payment networks will be more resilient. In this case, a large number of nodes will be able to verify transactions more securely. The stable coins restrict any tampering with the database or adding inaccurate information since consensus has to be reached first among nodes that validate the data.
Conditions For Using Stablecoins
With stablecoins gaining popularity over the years, the main concern surrounding them is regulation. And it still remains unclear until now. Therefore, the major condition when deploying such technologies is that the bank needs to comply with applicable laws as well as fair and safe banking practices.
They have to be aware of any potential risks surrounding stable coins’ activities, including fraud, compliance, and operational risks. The new technologies also need the technical expertise that ensures that the banks can manage said risks in a secure and sound manner.
Overall, the banks should put measures in place to guard against money laundering acts or potential terrorist financing.
The acceptance of stable coins is a major win for cryptocurrencies and blockchain technologies. The move sets a new foundation for the next generation system of payment. So, as the OCC continues to engage with the upcoming digital-oriented technologies demanded by consumers, perhaps now is the time to start finding your place in it all.