- Banks can now validate, store, and record payment transactions by serving as nodes on INVNs.
- According to the OCC, INVNs offer higher efficiency and stability for payment activities.
- Banks that run nodes on INVNs must adhere to relevant laws and offer safe, fair banking.
The Treasury’s Office of the Comptroller of the Currency (OCC) has greenlighted federally chartered banks to run nodes and use stablecoins for payments and other acceptable functions. The agency published a letter on January 4, noting that national banks or federal savings associates may validate, store, and record payment transactions by working as a node on independent node verification networks (INVNs). The OCC, however, asserted that banks must adhere to applicable laws while ensuring safe, sound, and fair banking practices even after embracing these technologies.
In the letter, Acting Comptroller of the Currency, Brian Brooks said,
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“While governments in other countries have built real-time payments systems, the United States has relied on our innovation sector to deliver real-time payments technologies. Some of those technologies are built and managed by bank consortia and some are based on independent node verification networks such as blockchains.”
Brooks added that this letter seeks to eliminate any legal uncertainty regarding the capability of banks to connect to blockchain networks as validator nodes. As such, banks will be able to complete stablecoin transactions on behalf of their customers, who are steadily demanding the speed, efficiency, and interoperability associated with the nascent asset class.
A forward-looking outlook
According to the OCC, the federal banking system can benefit significantly from engaging in INVNs. Among the perks that the system can take advantage of include efficiency, effectiveness, stability of payments activities, and unlocking the benefits of real-time payments, which other countries are already enjoying. The publication further cited that the decentralized nature of INVNs would help make the system more resilient, seeing as a large number of nodes verify transactions in a trusted way. The OCC also pointed out that INVNs can help prevent bad actors from tampering with information on a database.
While the OCC believes in new technologies, it also acknowledged that adopting them would introduce risks to the banking system. These include operational risks, compliance risks, and fraud. To this end, the entity urged banks to ensure their technological expertise suffices to manage such risks effectively. The letter went on to note that banks should guard against money laundering activities and terrorist financing by improving their compliance programs. Apart from this, banks will also have to adhere to the reporting and recordkeeping requirements of the Bank Secrecy Act.