U.S. stablecoins will be available for payment


The U.S.’s largest banking regulator, the U.S. Department of the Treasury’s Office of the Comptroller of Currency (OCC), announced on its official website that U.S. banks are allowed to use public blockchains and USD stablecoins as the settlement infrastructure in the U.S. financial system. Due to the huge amount of visits, the official website was once paralyzed.

"This is a very important breakthrough. It means the official recognition of the legal status of digital stablecoins. From a logical point of view, stablecoins mainly anchor some relatively safe assets, such as U.S. dollars, bonds, etc. It’s easier to get recognized by official institutions.” Chen Bo, director of the Digital Finance Research Center of Central University of Finance and Economics and deputy director of the Bay Area International Financial Technology Laboratory, told Times Finance on January 5.

Jiang Zhaosheng, Director of Blockchain Research of Zero One Think Tank and Researcher of Digital Asset Research Institute, told Times Finance and Economics on January 5 that the U.S. Office of the Comptroller of the Currency (OCC) announced that federally regulated banks can use stablecoins for payment, which does not completely mean mainstream. The recognition of digital currencies by financial institutions. "At present, it may only support USDC and other compliant USD stablecoins, not including USDT and other unqualified USD stablecoins, and no mention of encrypted digital currencies such as Bitcoin and Ethereum."

The cryptocurrency industry opens a new chapter

The Office of the Comptroller of the Currency (OCC) stated that banks can treat public blockchains as infrastructure similar to SWIFT (Bank Settlement System), ACH (U.S. Automatic Clearing System) and FedWire (Federal Electronic Transfer System), and stabilize coins (Such as USDC) is regarded as an electronic storage method. This means that banks can use stablecoins to facilitate customers' payment transactions on the independent node verification network, including issuing stablecoins and converting the stablecoins into legal tender. The founder of Morgan Creek Digital published a post highly praised the OCC approach, believing that the cryptocurrency industry will open a new chapter.

"The possibility of payment with stable coins is a big step forward in mainstream financial institutions' recognition of digital coins. Although the current digital coins have payment functions, they have not been able to get out of the circle. This is a very good thing." Li Bai, CEO of Yunchuang and co-founder of Bitoctopus, told Times Finance and Economics on January 5.

At present, there are many types of stablecoins. The mainstream view divides stablecoins into three categories: First, stablecoins mortgaged by legal currencies. The most typical is USDT, which is called TEDA currency in China, and USDT is linked 1:1 with the US dollar; the second is a stable currency collateralized by encrypted currency; the third is an unsecured stable currency, or algorithmic stable currency, which is determined by computer algorithms or programs Supported stable currency.

"Stable coins that are more easily accepted and recognized by regulatory agencies mainly refer to the first type of stable coins that are mortgaged by fiat currency." Attorney Zhang Bin from the Beijing headquarters of Yingke Law Firm told Times Finance on January 5.

In this statement, the U.S. Office of the Comptroller of the Currency (OCC) specifically emphasized that its policy only applies to digital stablecoins that are 1:1 linked to a single legal currency and have a custody wallet; it does not apply to digital stablecoins issued by other mechanisms.

Stablecoins are considered to be a bridge connecting the real world and the encrypted world, but there are still many problems to be solved.

"Stablecoins are generally in circulation around the world, but the so-called compliant stablecoins are only partially compliant." Jiang Zhaosheng, director of blockchain research at Zero One Think Tank and researcher at the Digital Asset Research Institute, told Times Finance on January 5.

Jiang Zhaosheng believes that there are three main risks to stablecoins: First, the value of stablecoins is greatly affected by reserve assets; second, the stability of stablecoins is more reflected in the stable exchange relationship with reserve assets. If the exchange channels are blocked, the value of stablecoins The value will also be greatly reduced; third, the contradiction between partial compliance of stablecoins and global circulation is difficult to reconcile in the short term.

"Stablecoins are not so stable. After entering the payment system, many aspects need to be improved. The current mainstream stablecoins themselves also have many problems, such as low financial transparency and private issuance, which restrict the development of current stablecoins. But everything has a beginning. With the entry of institutions like OCC, I believe it will gradually be improved and developed." Li Bai said.

OCC supervision "step by step"

"The U.S. Office of the Comptroller of the Currency (OCC) is an independent agency of the U.S. Department of the Treasury. From the OCC's speech this time, it can be seen that the U.S. official understanding and supervision of stablecoins follow gradual steps, which is a natural result. Zhang Bin, a lawyer at the Beijing headquarters of the law firm, said.

"Stablecoins are produced with cryptocurrencies. The value of cryptocurrencies fluctuates greatly, and they are not ideal as a medium of exchange and account units. For example, Bitcoin has gone from a trough of more than $3,000 in the past year to a recent breakthrough. US$30,000 is the best example. Therefore, only reduced volatility of encrypted assets can be accepted by more groups. The creation of stablecoins partially solves the above-mentioned problem of volatility of encrypted assets." Zhang Bin said.

"Early digital stablecoins were not officially recognized. They were mainly exchanged with statutory U.S. dollars by private institutions' own credit guarantees. Therefore, there have been constant doubts about stablecoins." Zhang Bin introduced that USDT was one of the earliest stablecoins. First, it was originally designed for people who cannot directly use U.S. dollars to conduct crypto asset transactions. At the same time, the emergence of stable currencies such as USDT may also circumvent the restrictions on fiat currency participation in encrypted asset transactions in some countries.

"This statement allows Federal Chartered Banks and Federal Savings Institutions to legally hold the reserves of digital stablecoins and provide related services for stablecoin issuers. This statement provides greater certainty for stablecoin supervision and will encourage more Many financial institutions carry out virtual asset business." Zhang Bin said.

As the prudential regulator of the US Federal Banking System, the core mission of the Office of the Comptroller of the Currency (OCC) is to establish and maintain a responsible and innovative financial system.

In the past few years, due to regulatory and conceptual restrictions, the U.S. banking industry has made very slow progress in providing encrypted digital asset services. In March 2020, Acting Administrator Brian Brooks joined the Office of the Comptroller of the Currency (OCC) and began to focus on advancing the development of the U.S. banking industry towards the direction of encrypted digital assets.

In July 2020, the Office of the Comptroller of the Currency (OCC) issued a statement letter clearly stating that U.S. Federal System Banks can provide custody services for encrypted digital currencies, and at the same time reiterated that the National Bank can provide any legal entity including encrypted digital currency companies Provide financial services.

In September 2020, the U.S. Office of the Comptroller of the Currency (OCC) issued a statement letter confirming that the National Bank and the Federal Reserve Association can provide storage custody services for users' stable currency products.

At the same time, the U.S. Office of the Comptroller of the Currency (OCC) also faces numerous obstacles. In December 2020, the National Banking Regulatory Commission (CSBS) filed a lawsuit in the District Court of the District of Columbia against the Office of the Comptroller of Currency (OCC), accusing the latter of creating new state bank licenses for non-banking companies and will soon approve the license of Figure Technologies Application. CSBC President John Ryan said that if OCC is allowed to create special-purpose non-banking licenses, it will redefine the entire banking system and cause new systemic risks.

Earlier, Maxine Waters, Chairman of the US House of Representatives Financial Services Committee, stated in a letter to the new President Biden that it is recommended to revoke or supervise all cryptocurrency-related guidance issued by the Office of the Comptroller of the Currency (OCC).

What are the implications for China?

"The development of American digital currency is not the same path as China." Chen Bo, director of the Digital Finance Research Center of Central University of Finance and Economics and deputy director of the Bay Area International Financial Technology Laboratory, told Times Finance.

Chen Bo believes that China's legal digital currency is a digital currency based on the renminbi, which is equivalent to issuing a new digital currency. The legal digital currency of the US dollar is directly linked to some existing digital currencies, which is another logic.

"The reason behind it is also very simple. From a global perspective, the U.S. dollar is already in a monopoly and dominance. There is no need to issue its own digital currency. It can directly enter the existing digital currency system and exert its influence. For it, this is a shortcut. In contrast, the renminbi is still a small currency, and it is reasonable to launch a digital currency with better technology." Chen Bo said.

"Because of the different concepts, it is difficult to say what kind of results will be achieved in the end, and who can learn from whom." In Li Bai's view, compared with other digital currencies in the world, my country's central bank digital currency (DCEP) takes a different approach. It draws on some experience of the world's digital currency system, and then strengthens and upgrades it, making it easier to mature.

“my country’s central bank’s digital renminbi has already taken the lead, and digital renminbi wallets have been tested in Shenzhen, Suzhou, and Beijing. The digital renminbi is ready to come out. In contrast, my country currently has no plans for stable currency regulatory compliance. It is also difficult to recognize the legal status of stablecoins from the regulatory level like the United States." Zhang Bin said.

Jiang Zhaosheng believes that the biggest reference for my country's digital currency regulatory concept in the United States is to "regulate digital currency companies that conform to the existing regulatory framework through the license system."

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