The federal company that oversees banks issued a letter on Monday that provides monetary establishments a inexperienced gentle to carry reserves to assist so-called stablecoins—digital currencies just like Bitcoin which are backed on a one-to-one foundation by actual world cash.

Whereas stablecoins have existed for years, their recognition has soared in latest months each in cryptocurrency circles, and amongst companies which have embraced them as an environment friendly option to settle worldwide transactions.

In its letter, the Workplace of the Comptroller of the Forex (OCC) acknowledged that U.S. banks can lawfully maintain the fiat foreign money reserves of corporations that challenge stablecoins, supplied these corporations adjust to federal banking legal guidelines.

In accordance with Jeremy Allaire, the CEO of cryptocurrency agency Circle—which has issued a stablecoin referred to as USDC alongside crypto big Coinbase—the letter will present authorized cowl for tech and finance corporations which are experimenting with stablecoins.

Allaire pointed particularly to Facebook, which is backing a consortium called Libra that plans to challenge a worldwide digital foreign money that will likely be backed by US {dollars} or by a basket of main currencies. Allaire additionally steered that corporations like Sq., whose CEO has expressed strong support for cryptocurrency, are more likely to make stablecoins a part of their operations in 2021.

A spokesperson for Libra declined to touch upon the OCC information. Sq. didn’t instantly reply to a request for remark.

The OCC letter isn’t transformative in that some U.S. banks already maintain stablecoin reserves. These embody US Bancorp, which holds extra the greater than $2 billion of reserves that again the USDC stablecoin.

Allaire, although, says the letter will present assurance to different banks—a few of whom stay skittish about cryptocurrency ventures. He says that, as stablecoin use expands and extra corporations search to challenge their very own stablecoins, the presence of extra banks will likely be important.

In its letter, the OCC certified its assist for stablecoins by noting that it utilized solely to ventures that adjust to rules corresponding to know-your-customer legal guidelines, and which enable common audits of their reserves. This would appear to exclude unique stablecoins like DAI which are supported partially by algoritmhs, in addition to Tether. The latter is the most well-liked stablecoin challenge, however has been dogged by complaints about its lack of transparency.

The OCC’s pronouncement on stablecoins comes two months after the regulator opened the door for banks to retailer cryptocurrencies like Bitcoin on their clients’ behalf.

Extra must-read finance coverage from Fortune:

LEAVE A REPLY

Please enter your comment!
Please enter your name here