US banking regulators allow reserves for stablecoins
22. September 2020
US banks can now officially hold reserves for stablecoins.
According to a public letter from the US monetary authority on Monday, banks are free to hold reserve currencies for stablecoins
There are new guidelines stating, “we come to the conclusion that national banks may hold such stablecoin ‘reserves’ as a service for bank customers”.
Brian Brooks, chief executive of the US monetary authority, said that stablecoin services are already offered by many banks: “National banks and national savings banks are already engaged in stablecoin-related activities worth billions of dollars every day.”
The letter goes on to say that for the time being this only applies to stablecoins that are linked 1: 1 to another currency. This means that tokens such as Saga or some versions of Libra that are linked to “currency baskets” are exempt.
Tether (USDT) is probably the most famous stablecoin that is pegged to the US dollar
The reserves for this are held in New York. However, there has been controversy surrounding the use of these reserves. Tether is said to have used part of it to cover the losses of its sister exchange Bitfinex.
Brian Brooks is the former Head of Coinbase’s Legal Department. In March he took over the management of the US monetary authority and since then the authority has been working increasingly on regulations for crypto in connection with US banks. In July, the agency published a similar decision confirming that federal banks are allowed to hold cryptocurrencies.