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Recent OCC Update: Crypto Banking Is Going Mainstream

Following up the actual crypto momentum from 2020, the Office of the Comptroller of the Currency (OCC) recently announced updates showing how fast crypto and traditional financial services are converging.


Managing the charge ahead, and possibly serving as an example to other institutions is Anchorage, which in January took a conditional trust charger from the OCC, making it the first national bank for digital assets. Despite this growth, though, there are still many obstacles toward wider adoption of blockchain-based banking.



One significant issue that has shown to be a headwind to wider blockchain and crypto choosing and utilization, primarily as a medium of exchange, is the fact that these technologies form the foundation for an alternative financial system. While this was the original concept behind BTC and other cryptos, this also indicates that some of the experience and convenience linked to incumbent financial structures are not present. The OCC, though, appears to be taking actions to address this fundamental concern.


The first relevant announcement defined that federally chartered banking institutions can hold deposits that work as substitutes for stablecoin issuers. This pronouncement accommodates to provide higher clarity and assurance as to what banks can offer in terms of services to stablecoin issuers, besides integrating blockchain and crypto into the financial system. The major recent update allows federally chartered banks to purchase, sell, and issue stablecoins, as well participate in what is referred to as independent node verification networks (INVN), the OCC terminology for blockchains.


These new updates from the OCC appear to show that many of the conveniences, security procedures and efficiencies of fiat-based banking will soon be augmented with the safety, traceability and clarity of blockchain-based solutions. Due to the recent nature of these notifications – September 2020 and January 2021 – the long term impressions of these updates are still occurring, but let’s take a look at some of the possible implications.


These updates solidify the worth of stablecoins. Stablecoins are increasingly looking just like the way forward for the blockchain and crypto-asset space, especially because it pertains to using cryptocurrencies as a legitimate medium of exchange. Both of the OCC updates ask stablecoins and the way stablecoins converge with current financial institutions and payment pipelines.


The January report showed that banking institutions could now become parts of public blockchains, and facilitate transactions taking place in the frame of cryptos. Not just any cryptocurrency; the update specifically noted that stablecoins are the approved cryptocurrency as per these notices. This specificity more highlights the significance of stablecoins for the future of crypto selection.


Blockchain banking are going to be a reality. A further implication of these updates, not surprisingly, is that some clarifications and guidelines are stimulating the possibility of a true blockchain-based banking system. Now that federally chartered banking institutions can both be parts of public blockchains, and verify transactions that take place through stablecoins, there are very few restrictions in the way of creating an entire institution only focused on blockchain and crypto transactions.


There were many of this type of institution already being developed and built out; these further clarifications from the OCC will only help accelerate these trends.


New applications will develop. Something that may be an old story to blockchain and crypto fans, but might appear as a wonder to non-experts or newer players to the area is the significance of smart contracts to the blockchain discussion. Drilling it down to its basic parts, a smart contract allows blockchains and the data included therein to communicate, transact, and interact with each other as well as other technology systems. With the strength of banking institutions, and by expansion the funding, staff, and expertise at those institutions, now able to be full and active members of blockchains, the speed of development of new applications will almost certainly accelerate.


It would be wise to determine that these OCC updates – although targeted to banking and payments – will in turn help promote new services in different industry areas. Property sales, insurance payouts and policies, tax collection and assessment, and other banking-tangential areas are sure to benefit from this improved interest and investment.


Stablecoins, previously a high flying area of the blockchain and crypto-asset space, proceed to be turbocharged by these new administrative clarifications. These announcements and clarification emphasize, yet again, how significant stablecoins are for the continued maturation, development, and integration of blockchain over a wide collection of economic areas.


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