Following a major announcement by the US Office of the Comptroller of the Currency (OCC), major tribes within the crypto space – be it stablecoins, Bitcoin (BTC), Ethereum (ETH), etc. – started claiming the news is beneficial for them specifically.
On Monday, the OCC published Interpretive Letter 1174, which stated that banks may use new technologies, including stablecoins and independent node verification networks (INVNs, or blockchain networks), to perform bank-permissible functions. This, among other things, means that a bank may use stablecoins to facilitate payment transactions for customers, and may also issue these coins and exchange them for fiat. The participating banks, however, must be aware of the accompanying compliance, operational, and fraud risks, warned the federal banking regulator.
“May well be the most clear-eyed regulatory commentary on public blockchains I’ve ever seen,” commented partner at Castle Island Ventures and Coin Metrics co-founder Nic Carter, with others quickly sharing their thoughts too on how relevant this is for the Cryptoverse:
The OCC paved the way for banks to 👇
1. Access public chains (Eth, BTC, Celo, USDC) as payments rails
2. Hold each of those coins directly or on behalf of clients
3. Run a node for each of those chains
Biggest legitimization moment of decentralized infrastructure yet 📣
— Simon Taylor (@sytaylor) January 5, 2021
Therefore, as soon as the news was out, supporters of different crypto camps started commenting that the news is beneficial for the project(s) they are supporting. As they were directly named, stablecoins were the first to be discussed in this context. “This is a huge win for crypto and stablecoins – USDC,” said Jeremy Allaire, CEO of crypto financial services firm behind the USD coin (USDC) stablecoin, Circle. This will lead to the use of currencies such as USDC as a mainstream payment medium for all forms of payments and settlements, he said, and it “sets the stage for more regulated financial institutions to run blockchain nodes, and even become validators.”
However, Paolo Ardoino, Chief Technology Officer at Tether, the issuer of the most popular stablecoin, tether (USDT), urged not to “get too excited” because “apart microscopic banks, the big majority won’t be using any existing stablecoin.”
“Banks will issue their own stablecoin(s) and unlikely to use public blockchain much, both for privacy and speed reasons. Best outcome is that banks will reduce their operational costs and learn that the world evolved since 1970,” Ardoino said.
However, the OCC previously addressed the permissibility of a national bank holding reserves for stablecoins that are backed by fiat currency on at least a 1:1 basis. As reported, Tether claims that all tethers are backed 100% by its reserves, however, it does not provide any further information about its reserves. Meanwhile, according to the latest audited data, the issued and outstanding USDC tokens do not exceed the balance of the US dollars held in custody accounts.
Then, bitcoiners joined the discussion. “BTC is the settlement layer for all interbank transactions” and is “what everybody agrees upon on for all stablecoin issuers,” argued a commenter on Twitter, with another replying that Bitcoin is a slow network with rising fees when it “gets busy.” Binance CEO Changpeng Zhao stated that after the banks get used to using stablecoins for settlement, “they will also learn using bitcoin to settle is much better still, for the banks and everyone else.” And Nic Carter also commented that “stablecoins = bridge technology. final destination: still bitcoin.”
And then the arguments between the BTC and ETH camps began again (or still).
I would say he exact opposite of this is true, it’s huge for Ethereum not Bitcoin. Nearly all stablecoins are issued on Ethereum. How can you extrapolated that this is good for Bitcoin and ignore the foundational platform that had made stablecoins possible?
— lastmjs.eth ⟠ (@lastmjs) January 5, 2021
Therefore, the ETH camp wasn’t far behind. “This is the US financial system conceding to Ethereum and public open blockchains, there wasn’t even a fight-me stage,” said a Redditor. Tom Lombardi, Managing Director at 3iQ Digital Asset Management wondered “why isn’t ETH pumping,” as the OCC just gave it “the green light to take over the payment system.” But Bankless’ Ryan Sean Adams tweeted that, as all banks will have a stablecoin strategy and Ethereum leads in stablecoin settlements, this network rises as the winner.
Fact: the OCC just opened the floodgates for stablecoins
Fact: every bank is about to have a stablecoin strategy
Fact: Ethereum is the largest stablecoin settlement network by far
Fact: every stablecoin transaction increases the scarcity & value of ETH
Fact: ETH wins
— Ryan Sean Adams – rsa.eth 🏴 (@RyanSAdams) January 5, 2021
Seems like this is good for projects like Solana, Radix, Lightning Network, Liquid, Binance Smart Chain, etc other scalable technologies that will be able to settle the kind of volume that would be required for global adoption of stablecoins.
— Brad Mills ✍️🔑 (@bradmillscan) January 4, 2021
Meanwhile, some commenters are suggesting XRP as a solution for settling cross border payments sending remittances, wondering whether stablecoins can accomplish the same things XRP can. Others, however, believe the announcement spells doom for the project, as all this is happening at the time when Ripple is being sued by the US Securities and Exchange Commission (SEC).
However, others have argued that the news may not be as beneficial as initially thought – for anybody. The US Treasury is “adding a second layer on top of the blockchain,” which is “a mound of paperwork on top of every address, every transaction, until the blockchain is just some bureaucratic nightmare,” said ‘chuck_portis’ on Reddit. Their “dinosaur technology” is slowing down the innovative one. “[T]hey’re basically taking a car and tying a horse in front of it to make sure it stays under the speed limit,” they said.
Yet, the announcement seems to have given more hope to the Cryptoverse that not all regulators are bent on regulating the space out of existence, warping it into an unfamiliar mass far removed from what it originally represented, with some adding that there are more battles to be fought – and ultimately won.
Yes, there *are* people in government who understand that the time has come to revolutionize the financial system.
No, they’re not all against us.
Yes, more will come around to this inevitable conclusion over time.
No, it won’t be easy.
But yes, ultimately, we will prevail. https://t.co/FwmN7bSJwV
— Jake Chervinsky (@jchervinsky) January 4, 2021
This is correct. Unfettered access to the Federal Reserve payments system is a key differentiator for full-service depository institutions and a reason that so many tech firms require bank partners. This will continue to be a focal point as crypto moves into the mainstream. https://t.co/7Kp2KdRG6j
— John Popeo (@JWPopeo) January 5, 2021
Fundamentally this is great for Circle or any Co’s holding the USD backing the stablecoin.
Great for the free market!
Bad for anyone who gets sold using USDC instead of BTC.
Neutral for the ETH price … the higher ETH goes, the more expensive it is to use stablecoins on ETH. https://t.co/nmovvW4vFI
— Brad Mills ✍️🔑 (@bradmillscan) January 4, 2021
Fast transfers and better settlement will be the gateway drug to programmable money and everything DeFi has to offe… https://t.co/2ITaLyaNA5
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