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Financial Services Law Insights and Observations

OCC: Banks may hold stablecoins in reserve accounts

Federal Issues OCC Cryptocurrency Fintech Compliance

Federal Issues

On September 21, the OCC released Interpretive Letter 1172, stating that national banks may hold stablecoin in reserve accounts as a service to bank customers and may engage in activity incidental to receiving the deposits. According to the OCC, issuers of stablecoins—a type of cryptocurrency backed by an asset such as a fiat currency—have a desire to place assets in reserve accounts with national banks to “provide assurance that the issuer has sufficient assets backing the stablecoin in situations where there is a hosted wallet.” Hosted wallet, as defined by the OCC, is “an account-based software program for storing cryptographic keys controlled by an identifiable third party.” Because national banks are authorized to receive deposits and provide “permissible banking services to any lawful business they choose,” they may provide these services to issuers of stablecoins, as long as they comply with applicable laws and regulations. (In Interpretive Letter 1170, the OCC approved the holding of cryptocurrency on behalf of customers, covered by InfoBytes here.) Specifically, the OCC noted that national banks should ensure that deposit activities comply with the Bank Secrecy Act and anti-money laundering regulations. Moreover, a national bank must also “identify and verify the beneficial owners of legal entity customers opening accounts.” Lastly, the OCC emphasized that stablecoin reserves “could entail significant liquidity risks,” and national banks may consider entering into contractual agreements with stablecoin issuers to “verify and ensure that the deposit balances held by the bank for the issuer are always equal to or greater than the number of outstanding stablecoins issued by the issuer.” This guidance does not apply to stablecoin transactions involving un-hosted wallets.

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