Stablecoin industry urges US bank partners to change rules

Banks must back tokens with crypto, industry says

A group of leading crypto companies has sent a formal letter to the US Office of the Comptroller of the Currency (OCC). They are asking federal regulators to allow banks to hold cryptocurrency as part of their stablecoin reserves. Stablecoins are digital tokens designed to stay at a fixed value, usually equal to one US dollar. While most major stablecoins are backed by cash held in traditional bank accounts, the issuers argue this model is too slow for the future.

Key points

• A coalition of crypto firms is pushing the OCC to update federal rules.
• They want commercial banks to be allowed to hold cryptocurrencies like Bitcoin and Ethereum as stablecoin reserves.
• Current rules generally limit banks to holding cash and short-term government debt.
• The groups say they cannot scale without access to crypto assets.

Why current rules are a problem

At present, stablecoin issuers must keep their reserve funds in safe, traditional assets like cash or Treasury bills. This keeps prices stable but limits how much value the issuers can generate. The coalition wants banks to act as custodians for these digital assets. Custodians are companies that securely store private keys, which are essentially passwords that allow access to cryptocurrency on the blockchain. If regulators allow banks to hold these crypto assets, issuers could earn higher returns from yields generated by the blockchain network itself. This could make stablecoins more profitable for the banks that support them.

What is still unclear

It is not yet known if the OCC will approve these changes. The request is currently under review by federal regulators, and there is no set timeline for a decision.

What happens next

The stablecoin industry is waiting for a regulatory response. If the OCC rejects the request, issuers may continue to rely on traditional bank deposits, though they argue this will limit their growth.

Sources

• Decrypt