Buying bitcoin at the bank: Soon to be a reality in the US?
The US banking regulator OCC has issued a letter setting out the legal framework for US banks to hold cryptocurrencies and operate network nodes.
US banks will be allowed to operate network nodes in payment networks. On 4 January, they received the green light from the Office of the Comptroller of the Currency (OCC). This goes hand in hand with permission to offer banking services with stablecoins. These are digital currencies that guarantee the most Bitcoin Machine stable exchange rate possible – for example, through 1:1 coverage by dollar reserves. The major US bank JPMorgan has been experimenting internally with its own stablecoin for interbank trading for some time. The OCC letter uses the term „Independent Node Verification Network“ (INVN) for decentrally managed payment networks. Literally, the letter to US money houses states:
„National banks and federal savings associations (collectively referred to as ‚banks‘) may use new technologies, including INVNs and associated stablecoins, to perform bank-approved functions, such as payment activities.“
Buying Bitcoin at the bank – no more future music
The OCC is thus laying the groundwork for further dovetailing of crypto and traditional finance in the US. Allowing network nodes to operate and manage stablecoins could further fuel the proliferation of traditional crypto assets like bitcoin and ether, because:
INVNs can transfer several different cryptocurrencies, including but not limited to stablecoins. Stablecoins serve as a means of mapping fiat currency onto an INVN. In this way, the stablecoin provides a means for fiat currency to access the payment rails of an INVN.
Conversely, this means that banks could also become a place to buy and sell bitcoin and co. in the future. The OCC already set the course for this in September 2020 when it allowed banks to hold stablecoins in custody. This paved the way for the bank to become a crypto custodian – even if the permission at the time was still explicitly limited to stablecoins that are backed 1:1 by a single fiat currency. The latest letter from the OCC seems to give the banks greater leeway here.
OCC chief Brooks has blockchain experience
This is the second time the current head of the agency, Brian P. Brooks, has sent a strong signal to the blockchain industry. The banker, lawyer and entrepreneur, who was appointed to office by the Trump administration in May 2020, has already gained experience in the blockchain sector. Brooks was the Chief Legal Officer at US bitcoin exchange Coinbase from 2018 to 2020. At the same time, Brooks sat on the advisory board of Spring Labs, a blockchain start-up for financial services. It is quite conceivable that Brooks will have one or two more treats in store for the US token economy in his remaining four and a half years in office.