The federal company that oversees banks issued a letter on Monday that offers monetary establishments a inexperienced gentle to carry reserves to help so-called stablecoins—digital currencies much like Bitcoin which might be 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 approach to settle worldwide transactions.

In its letter, the Workplace of the Comptroller of the Foreign money (OCC) said that U.S. banks can lawfully maintain the fiat foreign money reserves of corporations that situation stablecoins, offered 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 large Coinbase—the letter will present authorized cowl for tech and finance corporations which might be experimenting with stablecoins.

Allaire pointed specifically to Facebook, which is backing a consortium called Libra that plans to situation a worldwide digital foreign money that will probably be backed by US {dollars} or by a basket of main currencies. Allaire additionally recommended that corporations like Sq., whose CEO has expressed strong support for cryptocurrency, are prone 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 will not be transformative in that some U.S. banks already maintain stablecoin reserves. These embrace 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 situation their very own stablecoins, the presence of extra banks will probably be important.

In its letter, the OCC certified its help for stablecoins by noting that it utilized solely to ventures that adjust to rules similar to know-your-customer legal guidelines, and which allow common audits of their reserves. This would appear to exclude unique stablecoins like DAI which might be supported partially by algoritmhs, in addition to Tether. The latter is the preferred stablecoin undertaking, 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 prospects’ behalf.

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