US Treasury OCC guidance: banks can now use public blockchains

[figmentofmyass]

the top american bank regulator just published new guidance yesterday. it allows banks to use public blockchains to carry out normal banking activities. https://www2.occ.gov/news-issuances/news-releases/2021/nr-occ-2021-2a.pdf

some key excerpts:

A bank may validate, store, and record payments transactions by serving as a node on an INVN and use INVNs and related stablecoins to carry out other bank-permissible payment activities, consistent with applicable law and safe and sound banking practices.  A bank should consult with OCC supervisors, as appropriate, prior to engaging in these payment activities. The OCC will review these activities as part of its ordinary supervisory processes.

Likewise, a bank may use stablecoins to facilitate payment transactions for customers on an INVN, including by issuing a stablecoin, and by exchanging that stablecoin for fiat currency.  In this context, stablecoins function as a mechanism of payment, in the same way that debit cards, checks, and electronically stored value (ESV) systems convey payment instructions.

by "INVN" they mean:

An INVN consists of a shared electronic database where copies of the same information are stored on multiple computers.  One common form of an INVN is a distributed ledger. Cryptocurrency transactions are recorded on these ledgers.

could this be the start of traditional banks entering the crypto space---accepting bitcoin deposits, issuing stablecoins, etc?

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[jseverson]

I've been reading around, and quite a few people seem to think this is the US' response to China's DCEP.

could this be the start of traditional banks entering the crypto space---accepting bitcoin deposits, issuing stablecoins, etc?

It definitely seems so, but it would ultimately depend on what banks decide to do with the green light. I'm not so sure about people keeping their BTC in banks because that would defeat the purpose, but I suppose less technical people will see that as the safer option. Ethereum probably benefits from this the most though, considering how many big stablecoins are already built on top of it.

[HeRetiK]

Interesting... I wonder if this comes as a reaction to more and more traditional companies holding assets in Bitcoin or whether it's the other way around with the hodling companies anticipating the upcoming changes.

It still seems like they try to their hardest to distance themselves from cryptocurrencies and make their own thing. At least that's the impression I get with them using the term "INVN" instead of already established terms such as "Blockchain" or even "DLT" which used to be the go-to term. (of course INVN might also be already an established technical term in banking including connotations that I'm not aware of, but when googling it I only find the stock ticker of an existing company)

My guess is that this is the start of banks trying to establish their own stablecoins. Maybe cooperate with existing stablecoin operators such as gemini. I don't think banks are yet ready for Bitcoin deposits. Not because they couldn't, but because they haven't yet given up on control.

I'm not so sure about people keeping their BTC in banks because that would defeat the purpose, but I suppose less technical people will see that as the safer option. Ethereum probably benefits from this the most though, considering how many big stablecoins are already built on top of it.

I think more newcomers keep their coins on exchanges than care to admit, so I wouldn't be surprised about people keeping their BTC in banks, no matter the silliness.

Good point about Ethereum. I do think that another likely scenario is banks trying to establish their own stablecoins on a smallish Ethereum clone that they can buy into and promote for profit though.

[jseverson]

I think more newcomers keep their coins on exchanges than care to admit, so I wouldn't be surprised about people keeping their BTC in banks, no matter the silliness.

Absolutely, I'd say the question lies more on banks actually offering the service, and how attractive they would be vs. existing options. Even institutions could prefer more specialized services like Coinbase Custody. I'd like to say that exchanges have first-mover advantage in this case, but considering crypto isn't necessarily mainstream yet, they absolutely still could catch up by attracting newcomers if they actually tried.

Good point about Ethereum. I do think that another likely scenario is banks trying to establish their own stablecoins on a smallish Ethereum clone that they can buy into and promote for profit though.

Yeah, I'm sure they would want to capitalize on this somehow. I wonder if they would actually want to utilize public blockchains though; JPM for one already has their own coin, and I don't see them backing down unless it completely fails. Other big banks could also be developing their own under wraps for all we know.

[dothebeats]

This could tighten the gap between crypto exchanges and banks even more, with Kraken being the first one to try and be a bank on itself. Anyway, I still don't get the point of having banks enter the crypto scene. If they are to be custodians of crypto coins, what purpose do crypto wallets even serve--at least for the newbies? And for payment solutions, what about crypto debit cards, or even cryptocurrencies themselves? On issuing stablecoins, banks can most certainly fulfill that duty, and we will be quite comfortable with them doing it since we all know that they do have the capacity to produce the amount they like, unlike some stablecoin providers that are still questionable even up to this day.

[figmentofmyass]

My guess is that this is the start of banks trying to establish their own stablecoins. Maybe cooperate with existing stablecoin operators such as gemini. I don't think banks are yet ready for Bitcoin deposits. Not because they couldn't, but because they haven't yet given up on control.

okay, let's say jpmorgan and some of the other big boys issue their own stablecoins---what's the end game for them? are they just trying to stay relevant in a context where SWIFT and ACH are becoming too slow/obsolete? stablecoins = faster settlement---is that all they're interested in? or are there possibly bigger plans in the offing that i'm not seeing?

I think more newcomers keep their coins on exchanges than care to admit, so I wouldn't be surprised about people keeping their BTC in banks, no matter the silliness.

i think banks accepting bitcoin deposits will represent a new era of retail adoption. most people are still stuck in the old way of thinking---they keep their money in banks, and they trust them. they don't trust bitcoin exchanges, or their ability to be their own bank.

[HeRetiK]

My guess is that this is the start of banks trying to establish their own stablecoins. Maybe cooperate with existing stablecoin operators such as gemini. I don't think banks are yet ready for Bitcoin deposits. Not because they couldn't, but because they haven't yet given up on control.

okay, let's say jpmorgan and some of the other big boys issue their own stablecoins---what's the end game for them? are they just trying to stay relevant in a context where SWIFT and ACH are becoming too slow/obsolete? stablecoins = faster settlement---is that all they're interested in? or are there possibly bigger plans in the offing that i'm not seeing?

What's the end game for Bitcoin? Imagine that, but under your own, private, corporate control.

Or imagine creating a stablecoin that eventually trades places with its collateral. I mean that's essentially what happened with gold, right?

I'm just spitballing though. In all likeliness the main motivation could be just to stay in the loop, trying to avoid a Kodak moment.

I think more newcomers keep their coins on exchanges than care to admit, so I wouldn't be surprised about people keeping their BTC in banks, no matter the silliness.

i think banks accepting bitcoin deposits will represent a new era of retail adoption. most people are still stuck in the old way of thinking---they keep their money in banks, and they trust them. they don't trust bitcoin exchanges, or their ability to be their own bank.

Absolutely!

To be fair though, I also neither trust bitcoin exchanges, nor the ability of most people to be their own bank