OCC letter OKs holding ‘reserves’ for stablecoin issuers; second letter since July on crypto services

An interpretive letter released this week gives the nod to federally chartered banks and savings associations holding reserves on behalf of customers who issue stablecoins that are backed by an asset such as U.S. dollars or other fiat currency.

The letter from the Office of the Comptroller of the Currency (OCC) addresses the use of stablecoins “backed by a single fiat currency on a one-to-one basis where the bank verifies at least daily that reserve account balances meet or exceed the number of the issuer’s outstanding stablecoins,” the agency said in a release Monday.

The agency’s interpretive letter applies to situations where there is a hosted “wallet,” or a program that stores the cryptographic keys associated with the digital currency in question, as the OCC letter itself explains in a reference to a related interpretation from July. “We are not presently addressing the authority to support stablecoin transactions involving un-hosted wallets,” it states.

Regulatory compliance responsibilities are also noted, including among them compliance with Bank Secrecy Act (BSA) due diligence requirements. The bank’s own compliance review, it notes, should include “but not be limited to” BSA customer due diligence requirements and the customer identifications requirements under section 326 of the USA PATRIOT Act. The institution must also verify the identity of beneficial owners of legal entity customers opening accounts, it states, and must comply with applicable federal securities laws.

Federally Chartered Banks and Thrifts May Engage in Certain Stablecoin Activities

Interpretive Letter #1172

RR: OCC letter finds cryptocurrency custody services within realm of permitted bank activities (July 22, 2020)