Earlier this week stablecoin issuers received a reassuring message from some of the top U.S. financial regulators: parking your fiat reserves in banks is a-okay.
On Monday, the Comptroller of the Currency (OCC), under the U.S. Department of the Treasury, declaring that national banks and federal savings associations can hold reserve funds for stablecoin issuers. It was a signal for these issuers to continue what they already have been doing for years.
Indeed, the dollar-backed stablecoin market nearly over the past year – from around $5 billion in September 2019 to around $19 billion currently – with much of that wealth backed by reserves held in bank accounts. Much of this growth has been driven by international as well as the increasingly being built on top of public blockchain technology. Since its inception, however, the stablecoin market has existed .
The new ruling, the first federal guidance issued regarding stablecoins, adds legitimacy to the booming market sector and paves the way for more banks to enter the ecosystem, say industry commentators. Still, it’s unclear whether the mandate will have any short-term significance.
“If you don’t have guidance from the banking regulator about how banks can participate in those schemes – or arrangements, rather – that would limit growth. It paves the way for growth,” Jeremy Allaire, CEO of Circle said over Zoom. “But it doesn’t change the way Circle operates today.”