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Original title: Interpretation of OCC’s intention: Can Bank of America hold privacy coins?
The U.S. Office of the Comptroller of the Currency (OCC) has taken another step in the supervision of cryptocurrencies, aiming to help banks deal with privacy currency business. According to Brian Brooks, the acting head of the U.S. Office of the Comptroller of Currency, the regulator wants to clarify whether privacy coins including Monero (XMR) and Zcash (ZEC) are allowed to be held, traded or borrowed by banks asset.
However, in an interview with The Wall Street Journal, Brian Brooks did not further explain when the relevant clarifications will be announced. At present, overseas media have contacted the U.S. Office of the Comptroller of Currency for verification. The agency stated that the main task at this stage is to confirm the bank. Is it possible to use blockchain as the basis for payment networks?
Brian Brooks previously served as the general counsel of the cryptocurrency exchange Coinbase. He stated:
“In the early stages, regulators seemed to be biased against the state of the cryptocurrency industry. People tended to take the most conservative and strictest measures against risks. Many of the greatest inventions that were later proved to be the greatest inventions in history were all delayed because of this processing method. Yes. Now, the U.S. Office of the Comptroller of the Currency hopes not to repeat the same mistakes, so it has decided to face the challenge and pay attention to legal risks while releasing its technological power.”
In July of this year, the Office of the Comptroller of the Currency opened the door to the Federal Reserve Bank of China and the National Savings Bank that wish to hold cryptocurrencies on behalf of their clients. The regulator issued an announcement on July 22, allowing national banks of all sizes and the Federal Reserve Association to custody cryptocurrencies, and stated that such custody services are a “modern form” of traditional banking activities related to custody services. About a month ago, the U.S. Office of the Comptroller of the Currency sought public opinions on the digital activities of such institutions (including digital assets and blockchain fields). This resolution marked a major change in the relationship between the U.S. banking industry and the emerging cryptocurrency ecosystem. . Later, several banks, including US Bank and PNC, responded that they may intend to provide customers with encrypted custody and other services.
In addition to the announcement statement, the Office of the Comptroller of the Currency also issued an explanatory letter outlining the changes in policy. Although this letter is unnamed, some of its regulatory requirements are worthy of attention, especially when it comes to issues related to the power of the National Bank to provide customers with cryptocurrency custody services. The Office of the Comptroller of the Currency stated:
Since digital currencies only exist in the blockchain or distributed ledger that stores them, the tool does not actually own the digital currencies. On the contrary, through the use of unique encryption technology, because it has the right to transfer a specific unit of digital currency between parties, it means that a bank’holds’ digital currency on behalf of the customer, in fact, possesses the encrypted access key of the encrypted currency unit . In addition, this letter of explanation also quoted the existing U.S. Office of the Comptroller of the Currency Supervisory Guidelines, which explained that banks may hold a variety of assets as custodians, including some unique and invaluable assets. Bank custody activities include Assets transferred electronically.
The Office of the Comptroller of the Currency also pointed out:
Institutions that have long been engaged in safe deposits and custody activities can provide cryptocurrency custody services, which is a form of authorization that allows the National Bank to perform traditional banking services electronically, including credit and non-credit capabilities. Banks that provide cryptocurrency custody with non-credit capability are essentially providing management for cryptographic keys to control and transfer customer cryptocurrencies.
In September this year, Perkins Coie, an international law firm, stated that regulated financial institutions need to ensure compliance with anti-money laundering regulations when supporting privacy coins. The recent attitude of the acting head of the U.S. Office of the Comptroller of Currency seems to be consistent with the long-term efforts of cryptocurrency lobbying groups. It is consistent because as early as July last year, the Coin Center, the largest cryptocurrency industry think tank in the United States, requested the U.S. Office of the Comptroller of the Currency to allow banks to support cryptocurrencies and accept stablecoins that are 1:1 linked to a “single legal currency.” . At the end of the month, the U.S. Office of the Comptroller of the Currency issued an updated guidance again, allowing the National Bank of the United States and the Federal Reserve Association to now hold reserves for stable currency issuers, and stable currency issuers can place assets in the reserve account of the National Bank of the United States. Ensure that the issuer has enough assets to support the stable currency when there is a custody wallet. For the above reasons, the U.S. Office of the Comptroller of Currency concluded that a national bank may hold this stable currency “reserve” as a service to bank customers.
The Office of the Comptroller of the Currency supervises nearly 1,200 U.S. banks, the Federal Reserve Association, and the branches of overseas banks in the United States. These institutions operate as much as 70% of the banking business in the United States. The agency has a positive attitude towards the cryptocurrency industry. Very important for market development.
First of all, this signifies that regulators are increasingly accepting stablecoins. The U.S. Office of the Comptroller of the Currency is sending a signal to banks that stablecoin activity is legal and that reserve accounts will receive the same federal protection as any other account. This may incentivize banks to actively seek stablecoin businesses and thereby expand their customer base and their share of the crypto market.
Secondly, since one of the current main use cases of stablecoins is to obtain revenue from the DeFi platform, this may be an incentive for traditional finance to start to look at the ongoing innovation of blockchain financial applications with an open attitude. New savings products can attract new customers, which in turn can accelerate the transformation of the traditional banking industry, which may also encourage new stable currency issuers to innovate further. For those working in the decentralized financial industry, it seems that stablecoin issuers are everywhere. However, from an external perspective, most stablecoin issuers are either small, offshore, or both. Except for the members of the USDC issuer CENTRE Consortium, which was established by Coinbase and Circle in 2018, few large American companies have commercial activities in this field.
Jonathan Gould, Senior Deputy Auditor and Chief Counsel of the U.S. Office of the Comptroller of the Currency, concluded that the regulator has actually been studying the cryptocurrency industry since 2018 (and maybe even worse). In addition to indicating that banks can directly provide custody services for cryptocurrencies, it also opens the door to providing services to crypto companies, but banks are unlikely to start providing these two services immediately because banks still need to ensure that they have appropriate risk management practices, otherwise Before they can actually provide these services, they must ensure that they are legally prepared.
