OCC clarifies bank and thrift participation in INVN and stablecoins

The OCC has released Interpretive Letter 1174 to clarify national banks’ and federal savings associations’ authority to participate in independent node verification networks (INVN) and to use stablecoins to conduct payment activities and other bank-permissible functions. The agency letter concludes a national bank or federal savings association may validate, store, and record payments transactions by serving as a node on an INVN. Likewise, a bank may use INVNs and related stablecoins to carry out other permissible payment activities. In deploying these technologies, a bank must comply with applicable law and safe, sound, and fair banking practices.

A common form of INVN is a distributed ledger, such as the ledgers on which crytocurrency transactions are recorded. In its Interpretive Letter 1170 (July 20, 2020), the OCC described distributed ledger technology as a shared electronic database where copies of the same information are stored on multiple computers. This shared database functions as both a mechanism to prevent tampering and as a way to add new information to the database. Information will not be added to the distributed ledger until consensus is reached that the information is valid. INVNs represent one of the key technologies that support the novel exchange mechanism underlying cryptocurrency. The other key technology is advanced cryptography.

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