The U.S. Office of the Comptroller of the Currency has given the green light to national banks and federal savings institutions to use public blockchains and stablecoins for settlement, a decision that could result in a huge boost to the sector.

The ruling was delivered by an interpretive letter released today that clarified that national banks and federal savings institutions can participate in the market as long as they comply with the law and safe, sound and fair banking practices.

“A national bank or federal savings association may validate, store and record payments transactions by serving as a node on an INVN,” the OCC said. INVN refers to independent node verification networks such as blockchains. “Likewise, a bank may use INVNs and related stablecoins to carry out other permissible payment activities,” the OCC added.

The reasoning from the OCC is that the adoption of blockchain and stable coins may “enhance the efficiency, effectiveness and stability of payments activities and achieve the benefits of real-time payments already enjoyed in other countries.” The OCC notes that activities using both may be more resilient than existing payment networks due to the decentralized nature of INVN’s and well as providing limitations to tampering or adding inaccurate information.

The OCC does warn of potential risks when using blockchains including operation risks, compliance risks and fraud. It specifically warns that banks should guard against potential money laundering activities and terrorist financing by adopting their compliance programs to ensure compliance with the reporting and record-keeping requirements of the Bank Secrecy Act.

“Our letter removes any legal uncertainty about the authority of banks to connect to blockchains as validator nodes and thereby transact stablecoin payments on behalf of customers who are increasingly demanding the speed, efficiency, interoperability and low cost associated with these products,” Acting Comptroller of the Currency Brian P. Brooks said.

The decision to allow national banks and federal savings institutions to use blockchain tech and stablecoins comes after the OCC gave approval to both to hold cryptocurrency in July. In that decision, also issued by letter stated that national banks may provide cryptocurrency services on behalf of customers including holding cryptographic keys associated with cryptocurrency. The letter also stated that national banks can also provide permissible banking services to any lawful business they choose, including cryptocurrency businesses, as long as they effectively manage the risks and comply with applicable law.

Image: OCC/Wikimedia Commons