Office of the Comptroller of the Currency hopes more guidance that help ease banks’ concerns about cryptocurrency
The Office of the Monetary Control Authority (OCC) hopes to establish a stricter regulatory framework, paving the way for traditional banks to start using cryptocurrency. The Treasury Department unit, which oversees national banks and the federal savings association, sent a letter outlining its views on how traditional financial institutions can organize many economic activities venture involving digital money.
There should be a strict regulatory framework for traditional banks to access cryptocurrency
The Office of the Monetary Control Authority is trying to neutralize the traditional banks’ misconceptions that: Transactions related to cryptocurrencies are high-risk, require lengthy due diligence checks, and costly.
Brian Brooks of the Monetary Control Office wants to establish systems that will allow banks to apply digital currencies securely.
“We are trying to unravel the cryptocurrency. Banks’ reluctance to participate in crypto-related projects is inevitable. Bank managers disagree with what is safe and what we think is insecure.”
The nexus between cryptocurrencies and criminal activity remains the top concern of financial professionals and regulators. According to the survey, about 63% of respondents working in the banking industry see cryptocurrencies as a risk rather than an opportunity.
In a comment letter sent in August 2020, the American Banking Association asked the OCC to help address banks’ concerns by clarifying anti-money laundering laws regarding cryptocurrency and encourage other regulators to adopt consistent guidelines.
In recent months, the OCC has been clarifying its position on crypto issues. In July, they announced that national banks and federal savings associations were allowed to provide crypto custodial services to customers, including holding the relevant, unique encryption keys to digital currency.
Last month, the OCC said:
“National banks and the federal savings association can keep deposits that serve as a reserve for certain stablecoins as a service to banking customers. More informations, a stablecoin is a digital currency backed by an asset such as a commodity or fiat currency. The US dollar, for example, has the potential to increase efficiency on a large scale and have more demand.”
The agency said it needs to give clear direction as some of the US’s largest banks already hold billions of dollars in reserve deposits to support several stablecoin projects. Furthermore, demand from companies issuing such stablecoins should also ensure that the issuer has sufficient assets.
The stablecoin’s potential has also been recognized by the Financial Task Force (FATF), a global anti-money laundering watchdog. However, in a report to G-20 finance ministers in July, FATF said the mass adoption of stablecoins could make them more susceptible to abuse and illegal activity.
“Banks need to conduct third-party due diligence before introducing a cryptocurrency issuer as a customer. of the bank to help manage risks arising from providing crypto-related custodial services. They can also confirm a cryptocurrency publisher has your client program by asking for their policies or conducting a test.”
“Like other technological developments in the past, there is the potential for criminal activity. There’s also a huge potential for economic growth. So we don’t want to eliminate the advantages. That’s because there is an opportunity for criminal activity. Instead, we want to provide compliance guidance to help banks innovate.”
OCC is also looking to determine whether banks can see the underlying blockchains as payment networks, similar to how banks use the Global Interbank Financial Telecommunication Association, known as Swift. , or Federal Reserve Network.
OCC hopes to clarify some of the other issues, including whether other cryptocurrencies, namely privacy coin/token, are authorized assets for banks to hold, transact, or lend or not.
Brooks concludes ”
“Putting crypto into the vision of banking scrutiny will help them fight criminal activities, such as fraud and money laundering. In the early days, due to bias on the status quo, people tended to focus on the most conservative, overly restrictive explanation of the risks in a way that delayed accepting something that would later become the greatest thing that ever happened, and what we were trying to do. The best way to do it is not to make a mistake this time. And be careful about the legal risks that unleash the power of technology.”
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