Change is Afoot – A New OCC Lead, Fair Market Ruling, and Legislative Bills

Digital assets are here to stay.  Regulators and traditional banks are finally accepting this fact, and adjusting operations to accommodate their integration.

Leader Change

Only days ago we were discussing the vacant role of SEC Chairman, and Gary Gensler – the expected successor to Jay Clayton.  Today, news has broken that another high-profile role is set to be filled.  It is believed that the Office of the Comptroller of the Currency (OCC) has found its new leader in Michael Barr.

Each of these aforementioned roles are ones filled by nominations from the presiding presidential administration.  As such, the background and professional history of these appointees can shed some light on the motives and goals of administration over the coming years.

Thankfully for digital securities, each of those expected to be appointed are well versed in blockchain and its many implementations.  While Gensler is known for his blockchain teaching at M.I.T, Barr has experience as an advisor to Ripple Labs dating back to 2015.

Office of the Comptroller of the Currency

The OCC holds a large amount of power within the United States.  It is responsible for the oversight of over 1,200 banks, and the creation of regulations by which they must abide.

In recent months, the OCC has been viewed in a particulary positive light by those involved with digital assets due to multiple developments.  Beyond the expected appointment of blockchain savvy Michael Barr, the following are several examples of these changes implemented by the OCC expected to benefit the maturation of digital assets.

Fair Access

On January 14^th, 2021, the OCC released the final iteration of its ‘Fair Access’ rule.  Simply put, this development prevents banks within the United States from imposing blanket bans on companies and individuals associated with certain industries.

“As Comptrollers and staff in previous administrations have made clear in speeches, guidance, and testimony, banks should not terminate services to entire categories of customers without conducting individual risk assessments. It is inconsistent with basic principles of prudent risk management to make decisions based solely on conclusory or categorical assertions of risk without actual analysis.”

Unfortunately, in the past few years there has been many instances of companies being rejected services in the traditional banking sector, simply due to an affiliation with cryptocurrencies.  While this refusal of service can still take place, the OCC is now ensuring that Banks must be justified in doing so.

“When a large bank decides to cut off access to charities or even embassies serving dangerous parts of the world or companies conducting legal businesses in the United States that support local jobs and the national economy, they need to show their work and the legitimate business reasons for doing so,”

For an industry just getting on its feet, restriction to traditional banking services has certainly been a lingering impediment.  With this new rule change, set to go in to effect in April of 2021, the playing ground will be fairer and more transparent for all.

Permissions Granted

Days prior to the finalization of its ‘Fair Access’ ruling, the OCC released Interpretive Letter 1174.  This was yet another positive change, as it allows for banks to utilize and issue their own stablecoins.

“National banks and Federal savings associations (collectively referred to as “banks”) may use new technologies, including INVNs and related stablecoins, to perform bank-permissible functions, such as payment activities.”

In addition to the OCC opening up the possibility for stablecoin use among banks, Legislative Bill 648, which pertains to banks in State of Nebraska, was put forth today.  This bill seeks to provide banks the ability to custody cryptocurrencies for clientele.  This Bill, which was put forth by Senator Mike Flood, is a first step towards his goal of making Nebraska a hub for FinTech.

Overall, between the recent rulings by the OCC, and Bills being put forth, it is not a stretch to assume that in the near future, traditional banks will be diving headfirst into digital assets.  With many involved in digital assets holding strong beliefs that adoption by traditional banks is not needed to succeed, the benefit of these developments are yet-to-be determined.  Once thing is certain however – change is afoot.