The Office of the Comptroller of the Currency (OCC), which is part of the United States Department of the Treasury, issued fresh guidance this week that authorized national banks and federal savings associations to hold reserves for stablecoin issuers. The SEC’s FinHub division chimed in as well.
And leading US-based cryptocurrency exchange Coinbase, part of the Centre Consortium that mints the USD Coin (USDC) stablecoin and a founding member of the Facebook-driven Libra Association, is unsurprisingly pleased with the news.
Paul Grewal, Coinbase’s Chief Legal Officer, tweeted out a statement in praise of the guidance today, and hopes that it will lead to adoption by banks of the stablecoins themselves.
“The recent news from OCC and SEC FinHub addressing national banks’ authority to hold stablecoin reserves is a welcomed vote of confidence in crypto, providing both clarity and certainty for stablecoin issuers, banks, and consumers alike,” Grewal wrote.
— Paul Grewal (@iampaulgrewal) September 24, 2020
“We’re happy to see regulators embrace innovations like stablecoins and provide much-needed guidance on how they fit within current banking frameworks. We hope this will lay the foundation to national banks being able to custody and transact in the stablecoins themselves,” he added.
“As founding members in the Centre Consortium (USDC) and Libra, we welcome engagement from regulators like OCC and look forward to more to come.”
Regulation might spook some crypto die-hards, but given the potentially mainstream appeal of stablecoins, it makes sense that Coinbase sees it as a positive. Not only does it give banks the comfort and peace of mind to handle stablecoins, but the OCC’s move could also be seen as legitimizing the whole concept of stablecoins.
Stablecoins are digital assets backed by another currency, typically fiat currency—and in the case of USD Coin, Tether, and Binance’s BUSD, for example, it’s the US dollar. That keeps the price relatively steady, and each digital dollar is backed in reserve by the real thing. According to Coinbase, there are now 2.5 billion USD Coins in circulation, with a 24-hour volume of $475 million.
In general, the crypto market has seen a massive uptick in stablecoin use throughout 2020. For instance, Tether, the market’s first and still most popular stablecoin, grew its market cap by more than $10 billion this year. USDC, meanwhile, has grown its supply by 250% in 2020, partly because of its use within the emerging decentralized finance (DeFi) sector, which has grown by $8 billion since June.
The OCC’s guidance on stablecoins this week follows previous guidance in July, which gave banks the go-ahead to take custody of crypto assets for customers and develop banking products around cryptocurrency. That move was also widely hailed by the industry as a positive step towards mainstream adoption of crypto.
Author: Andrew Hayward