National Banks & FSAs Can Hold Reserves for Stablecoin Issuers: US Federal Banking Regulator & SEC

The Office of the Comptroller of the Currency (OCC) issued new guidance regarding stablecoins on Monday.

“National banks and federal savings associations currently engage in stablecoin-related activities involving billions of dollars each day,” said Acting Comptroller of the Currency Brian P. Brooks.

“This opinion provides greater regulatory certainty for banks within the federal banking system to provide those client services in a safe and sound manner.”

As per the letter from the US federal banking regulator, national banks and federal savings associations (FSA) are allowed to hold “reserves” on behalf of their customers who issue stablecoins, and those coins are held in hosted wallets, those controlled by a trusted third party.

This means unhosted wallets, which are controlled by the individual user who owns the cryptos being stored, are not part of this announcement.

The SEC also issued a response to OCC’s guidance, in which it says whether a stablecoin is security will depend on “facts and circumstances determination,” which will require the analysis of the instrument.

The regulator asked the market participants to structure and sell a digital asset in such a way that “it does not constitute a security and implicate the registration, reporting, and other requirements of the federal securities laws.”


Jeremy Allaire, the co-founder and CEO of Circle, which along with Coinbase, has launched its own stablecoins called USD Coin (USDC), called this a “significant progress for the advancement of digital dollar stablecoins in the US financial system.”

This will “help the United States and the US dollar to continue its leadership role in the world economic system,” he said.

According to him, national banks allowing to hold reserves for fiat-backed stablecoins will provide businesses, fintech firms, and banks have “more confidence in building on this innovation.”

In 2020, stablecoins have exploded, currently around $20 billion, with Tether (USDT) accounting for more than $15.5 billion of it and USDC with 500% growth YTD $2.3 billion.

Market participants see it as bullish news, with one trader commenting, “Basically enables a LOT more money to funnel into crypto, if stablecoin providers don’t have to scramble for banks to hold the reserves.”

Related: European Countries Support EU Stablecoin Regulation

Also Read: BoE Gov. Calls for Global Standards for Stablecoins, Instead of Playing Catch Up

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Author: AnTy

U.S Banks and Big Tech Ask the OCC for More Clarification to Issue Crypto Services

The United States Office of the Comptroller of the Currency (OCC) has received over 90 responses from various stakeholders’ in the financial services sector on its advanced notice of proposed rulemaking (ANPR) issued last month.

This independent bureau which operates under the U.S Treasury made highlights in July after it was approved for banks within its jurisdiction to act as crypto custodians. From the responses on the ANPR, some banks including PNC and the U.S are actually interested in scaling operations into the crypto scene.

With the OCC still at the initial stages towards rulemaking, some figures in the industry believe that now is the best time for innovators to give their input to the agency. Prominent firms that aired their views on the OCC ANPR for digital currency policies include Visa, Facebook’s Novi, Stripe, ConsenSys and Google which even suggested that the OCC should incentivize FinTech developments through hackathons, pilots and innovation competitions.

Industry Stakeholders Take!

A few issues appeared to have been more common for most of the stakeholders who gave their feedback before the August 3 deadline. The American Bankers Association (ABA) which wrote a letter as part of its contribution mainly highlighted the need for a consensus in taxonomy and terminology amongst other areas for the integration to happen seamlessly. The ABA letter reads,

“Effective policy analysis on crypto assets is essential to maintaining banks’ capacity to innovate, but it may be inhibited by the lack of common terminology. A common taxonomy and understanding of crypto assets’ risks and features, broadly consistent and coordinated across all the relevant regulators, is essential to fostering prudent innovation within a sound risk management framework.”

User protection policies were also highlighted in terms of privacy and security given the delicate balance needed to maintain some fundamental aspects of cryptocurrencies. Coin Center’s Research Director, Peter Van Vulkenburgh, was of the opinion that banks can actually provide privacy and surveil their clients’ activities through private coin and other features within crypto ecosystems. These sentiments on privacy and security were also echoed by MasterCard’s Tina Woo as she went to highlight the underlying potential,

“We believe cryptocurrencies and blockchain technology hold the potential to enhance operational resiliency, improve auditability, and enable new functionalities.”

Finally, an interesting perspective was raised by 3rd party crypto service providers which appear to be in favor of banks sub-contracting for critical crypto services. BitGo which has been a crypto custodian for over a year is one of the stakeholders’ who are of this view. Interestingly, the firm has the backing of payments giants Visa and MasterCard which are both eyeing the crypto card market and have been making strategic moves in the recent past. Ky Tran-Trong, Visa’s VP for Global Regulatory Affairs, confirmed this position,

“Our objective is to enable digital currency users to spend from their digital currency balance using a Visa debit or prepaid credential anywhere Visa is accepted.”

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Author: Edwin Munyui

US Regulator Authorizes National Banks and Federal Saving Institutions as Crypto Custodians

U.S. regulator, the Office of the Comptroller of Currency (OCC), allows federal banks and national savings institutions to officially custody cryptocurrencies for their customers. The statement released on July 22, confirms that any national bank or savings facility can now hold on to unique cryptographic keys of cryptocurrencies in their vaults pertaining to custody services.

According to the statement, the decision to allow banks to offer crypto custodial services follows a growing demand by investors to safely store their cryptographic keys, which, if lost, capitulates the value of the assets. This news opens up the field to large banks to provide these services, relieving current state-chartered crypto custodians such as Coinbase and Gemini.

Nonetheless, crypto custodial services differ from the traditional custody services banks offer, the statement explained. Given that the digital assets are not physical, digital wallets will be required to safely store the cryptographic keys.

The release, which comes a month after the OCC asked for public input on Crypto and DLT, further states that the increasing technological innovations in the financial world call for “banks and other service providers to leverage new technology and innovative ways to provide traditional services on behalf of customers.”

A modern form of traditional banking activities

Discussing the new regulation, the author of the statement, Jonathan V. Gould, the Senior Deputy Comptroller & Chief Counsel, claimed that cryptocurrency custodial services Is a new form of already existing asset custodian businesses of national banks.

The OCC permits national banks and savings to hold their customers’ cryptocurrencies in both a fiduciary and non-fiduciary role. Banks holding crypto in a fiduciary capacity will need to manage them in the same way as they manage other assets while non-fiduciary capacity targets holding cryptographic keys that control the actual transfer of the cryptocurrency.

Manage your cryptocurrency risk

Brian Brooks, the current head of OCC and a former executive at Coinbase, however, warns on the risk management of custody services across national banks. Focusing on customer assets protection, Brooks said,

“This opinion clarifies that banks can continue satisfying their customers’ needs for safeguarding their most valuable assets, which today for tens of millions of Americans includes cryptocurrency.”

The statement concludes by warning custodians to focus on risk management techniques, due diligence, and KYC/AML compliance as they begin the operations on holding crypto assets. No specific recommendation of customers was provided in the statement with banks open to deal with crypto institutions, as recently seen with JPMorgan onboarding Coinbase and Gemini.

This, however, should be done with the thought that cryptocurrencies do hold their risks and challenges. It states,

“A national bank or FSA engaging in new activities should develop and implement those activities consistent with sound risk management practices and align them with the bank’s overall business plans and strategies as set forth in OCC guidance.”

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Author: Lujan Odera

US Federal Bank Regulator (OCC) Issues Notice for Feedback on Crypto and DLT Activity

The Office of the Comptroller of Currency (OCC) has asked for feedback in matters crypto and distributed ledgers according to two notices published on June 4. This U.S bank regulator and charter issuer now wants to engage the public in creating a stable digital currency ecosystem based on regulation.

Dubbed ‘Notice of Proposed Rulemaking‘ and an ‘Advance Notice of Proposed Rulemaking‘, these initiatives seek to create a conversation with the likes of federal saving associations and banks amongst other stakeholders. Notably, it is the latter notice which focuses on digital currency activity and the supporting tech, distributed ledgers. Bryan Hubbard, the OCC spokesperson, echoed in an email that it is in the regulator’s interest to spearhead this discussion,

“The request for stakeholder comment[s] is part of the OCC’s commitment to responsible innovation and aligned with our understanding that banks must be able to evolve to meet the needs of the consumers, businesses, and communities that rely on them.”

This move comes shortly after Brian Brooks took the helm at the OCC in an interim position. The former Coinbase Chief Legal Officer is optimistic that the regulator will learn what form of support banks and the crypto ecosystem need to thrive together. Speaking to Cointelegraph, Brooks said that the OCC will now consolidate quickly on its thoughts about the crypto space:

“The OCC, quickly under my watch, will get a position together as to what… we think about national banks as appropriate custodians for cryptocurrency. We don’t have a view on that and I don’t want to prejudge that but it is certainly an interest of mine from my past life that we need to come to ground on that.”

OCC’s Focus Area in Crypto and DLT’s

As highlighted earlier, this regulator presented some questions in the filing as it seeks to understand the space better. Basically, the main questions revolved around crypto activity and how adoption can be accelerated through regulatory support. For digital currencies, the filing reads:

“What types of activities related to cryptocurrencies or crypto-assets are financial services companies or bank customers engaged? To what extent does customer engagement in crypto-related activities impact banks and the banking industry? What are the barriers or obstacles, if any, to further adoption of crypto-related activities in the banking industry? Are there specific activities that should be addressed in regulatory guidance, including regulations?”

On distributed ledgers, the filing asks almost similar questions with a focus on their potential to disrupt the current banking ecosystems:

“How is distributed ledger technology used, or potentially used, in banking activities (e.g., identity verification, credit underwriting or monitoring, payments processing, trade finance, and records management)? Are there specific matters on this topic that should be clarified in regulatory guidance, including regulations?”

The OCC has since directed interested stakeholders to share their views via mail, email, fax, hand-deliver, or simply file the feedback online.

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Author: Edwin Munyui

Intelligence Community Is Prepping For Black Swan Events That May Crush The US Dollar

It looks like the US Office of the Director of National Intelligence (ODNI) is looking to sponsor a researcher who can conduct a study on what would happen if the dollar would no longer be a global reserve currency.

The agency posted at the end of last year a job listing with the deadline on February 28, listing in which it’s saying that it’s looking for people with a background in economics. It also mentions the research is the first one of its kind for the intelligence’s post-doc program and that it’s meant to help with preparation for a black swan eventuality in which the US dollar would no longer be globally dominant.

The Research to Be Shared with the Intelligence Community

The study would fall under the National Counterproliferation Center’s purview. The National Counterproliferation Center is functioning under the ODNI and tries to combat weapons of mass destruction from being proliferated, mostly by stopping terrorist financing. The results of the research will be shared with the intelligence community.

While not attributed to any event or trend, the job listing does say it’s looking for cryptocurrency enthusiasts because there is the eventuality in which a digital currency undermines the US dollar, for example the digital yuan scheduled to be issued by China. This is exactly what the listing reads:

“If either of these scenarios or others come to pass, the U.S. would lose both its status in the world and its global authorities.”

A Researcher with Black Swan Events Knowledge

The researcher who will be involved in the post-doc program will receive sponsorship from ODNI, access to IT and advanced computing, plus funding. His or her work would be checked by the agency periodically in order to be understood. The researcher would collaborate with ODNI experts and other governmental entities.

The agency wants someone who knows how to work with statistics, artificial intelligence and who has knowledge about black swan events that happened throughout history, all while thinking all sort of scenarios of such events happening in the future.

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Author: Oana Ularu

Andrew Yang: The US Needs Consistent Legal Framework for Cryptocurrencies

Democratic Oval Office candidate Andrew Yang thinks the US needs to have a consistent cryptocurrency legal framework if it wants to be a market leader.

He made the statement during an interview given to Bloomberg on Thursday, and added that the regulatory situation at the moment is confusing and may bring harm to the people and businesses working in the crypto space. These are his exact words on the matter:

“Right now we’re stuck with this hodgepodge of state-by-state treatments and it’s bad for everybody. It’s bad for innovators who want to invest in the space. The underlying technology of cryptocurrencies is very, very high potential and we should be investing in it. We need to have a uniform set of rules and regulations around cryptocurrency use nationwide.”

The Current Crypto Legal Framework in US Criticized

One thing is for sure, the US doesn’t have a clear legal framework for the crypto space. Perhaps in some states like New York, crypto businesses have a licensing framework, but in the rest of the country, regulators rely on precedents that are very old, the guidance they receive from federal regulators and on international conventions, which has brought criticism against those in power from crypto enthusiasts.

Yang Is Pro-Technology

Yang is definitely pro-technology and the only candidate to talk about cryptocurrency until now. He was very clear when he said that, if elected, he will introduce clear guidelines for digital assets so that individuals and businesses to invest in their innovative ideas without being scared of changes in regulations.

He added that new regulations being introduced or not won’t stop people from using cryptocurrencies, and that a ban on crypto would only force the underground space in the industry to develop. According to him, the US needs,

“clear and transparent rules so that everyone knows where they can head in the future and we can maintain competitiveness.”

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Author: Oana Ularu

NYAG Responds To Bitfinex, Tether Calls The Case A ‘Highly Misleading Factual Presentation’

The New York Attorney General Office (NYAG) has responded to Bitfinex’s appeal to have the authority stop the ongoing investigations against them and Tether. This filing was made with the Appellate court in New York and seems to be slowly mounting pressure on both Tether and Bitfinex whose NY operations were halted as early as January 2017.

Bitfinex and Tether’s Fund Mismanagement Background

Investigations on securities misconduct and operating as one entity began when the NYAG raised claims that Bitfinex was using funds from Tether’s USDT reserves to meet its liquidity needs. This was later spiked by the arrest of Crypto Capital officials, a financial institution, which operated as a shadow bank for crypto projects until authorities cracked down on some illegal activities they had facilitated.

Bitfinex found itself in the middle of the Crypto Capital collateral damage having stored around $625 million funds with the ‘crypto bank’. This forced the crypto exchange to use proceeds from Tether to meet withdrawal demands despite the prohibitions on such activities. In doing so, Bitfinex was looking to meet a short of $850 million arising from the frozen funds but instead attracted the authorities. Reports from the NYAG office claim that the two entities have common shareholders and executives; a position which may have influenced the funds movement.

The NYAG Argument for Investigating Bitfinex

In the latest filing, the NYAG defended itself based on the Martin Act which gives this office the authority to initiate investigations before starting legal proceedings on financial market misconduct. Basically, the appeal will determine the extent to which the NYAG can request for information or start a legal process to prosecute Bitfinex and Tether.

However, Bitfinex in their defense had claimed that the human resources in New York linked to the firm’s operations is not sufficient to place it within the state’s jurisdiction. According to the NYAG, this is not entirely correct given the exchange’s Chief Strategy Officer was based in New York as well as a number of representatives. Furthermore, there has been evidence to show that the Bitfinex platform has been accessed from New York in 2019 despite its ban for almost 2 years.

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Author: Lujan Odera

Matrixport, Startup Created By Bitmain Co-Founder, to Expand to Europe with Zurich Office

A cryptocurrency start based in Singapore called Matrixport is about to open up a new office in Europe. The startup, which was created by the CEO of Bitmain, Jihan Wu, is set to expand to Switzerland by opening an office in Zurich in the coming weeks.

In the new country, Matrixport will be known as “Chaintech” and will offer options for trading, custody and lending services to its clients. The services are set to be similar to the ones which are already being offered in Singapore, where the main branch of the firm is based.

This expansion comes only a few months after Wu first launched the company, meaning that the expansion is happening quite quickly. As soon as Matrixport opened, several ex-Bitmain employees were hired to work there. Most of them were laid off during the bear market last year and this was the chance to rehire them.

The CEO of the startup is Hui Wang, who talked to the Swiss media and affirmed that Matrixport now plans to hire 10 more employees within the timeframe of two years. The new office is set to provide full services for customers, so they will not be redirected to the Asian company in order to access the services offered to them.

In related news, Bitmain’s branches do not seem to be doing so well. Bitmain Switzerland, the company’s subsidiary in Zug, will shut down soon. The branch was originally launched back in 2018 to boost the global reach of the mining manufacturer, but it seems that it was not so successful in this enterprise, after all.

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Author: Gabriel Machado

Bitfinex Wins Appeal to Stop Collecting All Documents in the $900 Million Tether Case

The ongoing Bitfinex and Tether probe by New York’s Attorney General’s office, (NYAG) takes yet another turn as a New York judge rules against NYAG’s request for the defendants to search for and collect all documents and information on the $900 million USD loan made by Tether to Bitfinex.

New York Judge Rules in Favor of Bitfinex

In April, NYAG obtained an injunction from the New York Supreme Court for Tether and Bitfinex to produce all information and documents from an alleged loan between the companies. The NYAG office claims Bitfinex illegally obtained $850 million to cover up losses and a further $900 million in loans from Tether.

Earlier in the month, Bitfinex appealed the request to produce documents pertaining to the loan in the Supreme Court. On Thursday, a judge serving in the NY Supreme Court, Justice Joel Cohen, ruled in favor of Bitfinex, stating,

“OAG’s request to order Respondents to search for and collect all documents and information called for in the §354 Order is denied as inconsistent with the order of the First Department ‘stay[ing] enforcement of the [§354 Order] pending hearing and determination of the appeal.’”

In the past few hearings, the courts have shone a bright light on Tether and Bitfinex – a move that is frustrating the NYAG’s office, as recent statements show. The office released a press statement complaining on the courts frustrating its efforts to build its case against Bitfinex, Tether and a number of affiliate companies.

Injunction on Bitfinex-Tether Relationship Upheld

Despite a torrid time in the courts in the past few months, Justice Joel upheld the injunction on Tether not lending any more funds to Bitfinex. The judge wrote,

“The injunction is hereby extended pending the hearing and determination of the appeal and, if OAG prevails on that appeal, for 90 days thereafter.”

NYAG is liable to appeal for an extension of the injunction if they prevail in the set appeal. The judge report read,

“The procedure for OAG to seek further extension of the injunction remains as set forth in the Court’s May 16 Order.”

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Author: Lujan Odera

Australian Taxation Office Forecasts Collecting $3 Billion In Tax Fines From Crypto Traders in 2019

The Australian Taxation Office (ATO) is officially starting to go after crypto traders who did not pay their taxes this year. According to the office, people who did not file for their crypto earnings are expected to pay $3 billion AUD in fines.

With the price of crypto going up this year, many people will be expected to pay on their crypto gains. The government is set to partner with both international and local crypto trading platforms to discover if people are not filing their taxes.

Many people believe that crypto transactions are untraceable, which is not the truth. In fact, they are very easy to track with the right software and the government can do it to discover who is evading its tax responsibilities.

Bulk data will be collected from exchanges to identify who is paying their taxes and who is not. Around 4% of the people in Australia have owned crypto at least once.

Now, the government believes that a lot of people did not report their earnings, so they will need to pay their taxes plus the fines, which can be very high in some cases. In the most severe cases, people can even go to jail for not paying their taxes if they are believed to be omitting them consciously.

When declaring crypto taxes, it is important to remember to pass all the important information to the government in order to avoid fines. Declaring even losses is a good idea, as the losses can be used as discounts for profitable trades.

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Author: James W