The US OCC opens up to the Blockchain
Earlier this month, the Office of the Comptroller of the Currency (OCC) of the United States issued the interpretative letter 1174, addressing whether US national banks and federal savings associations could use independent node verification networks (INVN – that is, blockchains) and stablecoins for payment activity.
And it was favorable.
This is basically recognition that cryptocurrencies are a valid form of currency, even if it is limited to stablecoins, and that blockchains are a valid form of ledger. I mean, if US banks are free to use it, why can’t we?
Of course, it is no surprise that the letter focuses on stablecoins. Stablecoins, as the name implies, are cryptocurrencies designed to have a more stable price. Although they aren’t as fun as less regulated coins such as Bitcoin (which just reached the 35k mark), they are more likely to enter wide circulation in the near future because you could use it to order a pizza without wondering whether its price grew by a thousand again in the last week.
So, what will this mean for the future of cryptocurrency?
Adoption of the blockchain
This means that US banks may now adopt blockchain technology into their ledgers and services. Although we can’t really expect this to happen any time soon, especially in the bigger banks – as overhauling an entire bank system is prohibitively expensive, time consuming and risky – newer, more daring banks and fintechs can take great advantage of it.
This also means, of course, much more investment into the technology, especially by bigger players. Just because the major US banks won’t adopt it entirely in the near future, that doesn’t mean they can’t find some use for it. After all, it is an inherently secure financial technology, and adopting it, even if partially, may mean less need to invest in cybersecurity. Using money to spend less money. Read more articles: Cybersecurity
Adoption of stablecoins
This could also mean that US banks may give support to stablecoins in the future. Which could also mean that storing your coins in a bank may become much safer.
As the cryptocurrency world is currently unregulated – and many cryptocurrencies want it to stay that way – there are always risks involved, like the famous Mt. Gox scandal showed quite clearly, as well as foreign powers taking over the coins, as China managed to do with Bitcoin. It is a high-risk, very-high-reward investment, but only if you know what you are doing.
Banks providing support to stablecoins in the same way as they provide for the dollar would give much more security to the coins, which would make them even more stable. On the other hand, it is also to be expected that they would be under more regulation, as banks have their own laws and procedures to follow.
Creation of new coins
This could also lead to the development of new coins by the major US banks, as well as US entrepreneurs, especially by use of ICOs in order to finance many kinds of enterprises.
Most notably, it could enable banks to develop their own stablecoins, for many different purposes. For example, they could be an internal “fake” coin used to represent the dollar in digital transactions using blockchain. There could also be an optional, separate coin used for digital-only transactions between people who have accounts in the same bank.
This could give more room for cryptocurrencies created by American companies to grow in American soil. For example, Diem (previously named Libra), a cryptocurrency being developed by Facebook which is bound to be released this year, could greatly benefit from it, by gaining more legitimacy within the traditional financial world using Facebook’s financial leverage.
That could, however, also mean that independent coins will get less space in the mainstream world. On the other hand, this may be the American way of dealing with the Chinese monopoly on Bitcoin mining and China’s announcement that they would release their own digital currency.
We will have to wait and see how this goes.