OCC's First Issued Guidance for Stablecoins Brings More Questions

On Monday, the Comptroller of the Currency, under the U.S. Department of the Treasury, issued official guidance declaring that national banks and federal savings associations can hold reserve funds for stablecoin issuers.

The new ruling, the first federal guidance issued regarding stablecoins, adds legitimacy to the booming market sector and paves the way for more banks to enter the ecosystem, say industry commentators.

"If you don't have guidance from the banking regulator about how banks can participate in those schemes - or arrangements, rather - that would limit growth. It paves the way for growth," Jeremy Allaire, CEO of Circle said over Zoom.

With the "Greater regulatory certainty" his agency has provided will come billions of dollars more in stablecoin issuances and transaction volumes, the reasoning goes.

In the guidance, the OCC writes that it is allowing banks to manage funds kept in a "Hosted" wallet, an address that would essentially represent the relevant stablecoin's reserves.

"The OCC does not regulate peer-to-peer transactions, they regulate transactions involving minting and burning stablecoins," she said - an activity that would involve a hosted wallet.

In a world where stablecoins are part of "Mainstream, everyday use," there will have to be "a balance between meeting needs of national security and keeping personal and business transactions private," Smith said.

It's a frame of reference that seems to comport with the U.S. Securities and Exchange Commission's stance on fiat-backed stablecoins as a type of "Store-of-value" rather than an investment.

"The SEC is saying fiat-backed, fully-reserved stablecoins are not securities," Allaire said, adding that it is taking a "Come talk to us and we'll verify" approach.

"You can't read too much into it because it says so little," he said, adding, "This raises more questions and concerns." A wide range of stablecoins may in fact be securities, including those that are algorithmically derived and those that are not provably fully-backed.