Bitcoin and the broader cryptocurrency market is on fire, overshadowing some of the most critical developments in blockchain technology happening at major financial firms like JPMorgan. News of JPM’s stablecoin, JPM Coin, being used in commercial transactions preceded a new statement from the OCC this week, clearing the utilization of stablecoins and INVNs by financial institutions of any legal uncertainty.
Crypto markets continue to undergo a institutional and generational transition into the future. Firms like Square and Microstrategy are buying so much BTC that liquid supply is becoming constrained to less than 25%. Meanwhile millennial investors are proving they have a much stronger interest in crypto than physical assets like gold.
Related ETFs: Grayscale Bitcoin Trust (GBTC), Amplify Transformational Data Sharing ETF (BLOK), First Trust Indxx Innovative Transaction & Process ETF (LEGR)
Blockchain Breakthroughs Charging Up Institutional Interest
Overnight, the price of Bitcoin (BTC) broke through its latest astronomical landmark: $35,000. While that will undoubtedly be the big crypto news of the day, many outlets have neglected to report on the advances in the blockchain technologies underlying cryptocurrencies.
Earlier this week, the Office of the Comptroller of the Currency (OCC) published an interpretive letter addressing whether national banks and federal savings associations could participate in independent node verification networks (INVNs, otherwise known as blockchain networks) or use stablecoins, minimum-volatility blockchain tokens, often linked 1:1 with the value an underlying fiat currency. The letter said that these financial institutions can participate as nodes on a blockchain and store or validate payments.
“Our letter removes any legal uncertainty about the authority of banks to connect to blockchains as validator nodes and thereby transact stablecoin payments on behalf of customers who are increasingly demanding the speed, efficiency, interoperability, and low cost associated with these products,” Acting Comptroller of the Currency Brian Brooks said in a statement.
That approval is the latest crypto-friendly move from the Treasury Department office, removing any legal uncertainty, and, potentially putting blockchain networks on an equal level as global financial networks such as SWIFT, ACH and FedWire. In a tweet, lobbyist group The Blockchain Association called the OCC’s interpretation “a giant advance for crypto because it paves the way for these networks to be a formal part of the U.S. financial infrastructure.”
The OCC’s recent guidance on stablecoins and blockchains follows another interpretive letter it issued in July, which clarifies national banks are allowed to provide cryptocurrency custody services, and hold unique cryptographic “keys” associated with cryptocurrency on behalf of customers.
Though a price spike across crypto exchanges following the news was relatively short-lived for most of the major coins (save Ethereum, which enjoys dominance in the stablecoin payment settlement protocol), this kind of regulatory acceptance of blockchain at the federal level is huge for institutions that are increasingly piling into blockchain technologies.
It is critical to note that the OCC’s letter is likely a direct response to what banks are working on behind the scenes. Stablecoins do not make big headlines in the financial media like the BTC bull run, but one could argue that the largest banking institutions are much more interested in stablecoins than they are in standard cryptocurrencies.
MRP has been covering the rise of stablecoins since the Spring of 2019 when IBM’s Blockchain World Wire (BWW) and JPMorgan’s JPM Coin, the first US-bank backed cryptocurrency, launched. Each of those projects have been focused on using stablecoins to facilitate wholesale or interbank fund transfers.
In October 2020, JPMorgan announced JPM Coin was being used in commercial transactions. The bank then launched a new subsidiary, Onyx, to handle its bank settlement blockchain platform, Liink. Cointelegraph reports that Goldman Sachs, one of several financial institutions to sign on to JPMorgan’s custom blockchain service, will reportedly sign on to Onyx for repo trades early next year.
Though the OCC letter is explicit in stating that banks may issue stablecoins as they might debit cards or checks, and exchange them for fiat…
To read the rest of this Market Insight, START A FREE TRIAL You’ll also gain access to: If you already have a subscription, sign in
To read the rest of this Market Insight, START A FREE TRIAL
You’ll also gain access to:
If you already have a subscription, sign in