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Cryptocurrency News

OCC has allowed US banks to custody reserve funds for stablecoins

  • The OCC has opened the doors for banks to hold reserve funds on behalf of stablecoin providers
  • The distance banks held crypto at is vanishing
  • Stablecoins on the rise but still centralised?

The OCC’s Decisions

Earlier this year, in July, the OCC (Office of the Comptroller of the Currency) allowed US banks to custody cryptocurrencies on behalf of customers. Now, they issued a new guidance for US banks to hold reserve funds on behalf of stablecoin providers.

Banking & Crypto

For the longest time, these two entities were seen as competitors and in some sense they still are. But banks held a certain distance from this asset class, a distance that is now vanishing. The two OCC decisions followed by Kraken Financial gaining a banking charter are proof of this.

Stablecoins

Amongst the crypto-industry, stablecoins are crucial when needing to transact on-chain; the latter has become important recently with the DeFi boom. This is mostly visible with the second most-popular stablecoin: USDC issued by Circle. The number of USDC tokens in circulation has almost quintupled since the start of the year.

Source: CoinMarketCap

Centralisation

There are of course worries of centralisation for centrally-issued stablecoins as they represent a single-point of failure. Additionally, censorship is a second worry as we have recently seen Circle Consortium blacklist an address with $100,000 in USDC at the request of law enforcement. While there may have been a very legitimate reason behind it, it is not a community-led (decentralised) decision.

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