Recent interpretive letters from the Office of the Comptroller of the Currency (OCC) make clear that Federally-regulated banks can hold reserves for stablecoin issuers. Some of the top line restrictions will be that the stablecoins have to have a 1:1 fiat-to-stablecoin reserve that is validated each day, and that those stablecoins must be in hosted wallets.
While the interpretive letter, and some associated infiormation from the Securities Exchange Cimmission are moving digital assets forward, there are a few questions and concerns.
NOT YOUR KEYS, NOT YOUR BITCOIN
A bit of a rallying cry to the digital asset indutry’s founding principles is that if you do not control the private keys to your digital assets, then you are not really in control; you have to request access to them or the ability to transfer them from another entity like a bank or custodian. In th eOCC’s interpretive letter they clearly state there needs to be “hosted wallets”. This is industry speak for a wallet that is controlled by an outside entity and not the actual owner of the digital assets. With a hosted wallet, your request to transfer your digital assets to someone else (to pay a vendor, or send to a friend) is actually routed to the wallet provider, who executes the transfer for you. Similar to a band sending an ACH on your behalf. Yes it is your money in the bank and yes you can send it….but there is someone approving and tracking that movement of value.
HOW MANY STABLECOINS DO WE NEED?
In my mind there is only need for a single “Digital US Dollar”. And, no, I do not think it needs to be generated by the US Federal government. A independent company who plays by the OCC rules would suffice. But there will be many stablecoins being created by many banks here in the USA. The JP Morgan Dollar, the CitiDollar, the Insert-your-own Local Community Credit Union Dollar. In theory they will all be worth exactly $1.00. But they will be built on different technologies which may effect their value. And though they will all have to abide by the OCC (and other) rules and regulations, the credit of JP Morgan is likely different than the credit of Podunk Community Credit Union. So there will likely be differing values of each coin on different blockchain platforms. And that means that there will need to be an exchange layer. And that adds complexity and friction. And friction is what we are trying to reduce.
FRONT OR BACK OF THE HOUSE?
Multiple, branded digital dollars are what consumers will see. But what about the back end of finance? What about settling trades between counterparties, or netting transactions between vendors and suppliers. If there were a single US Digital Dollar, the super complex, time consuming, riddles with errors and expensive act of settling trades would be done on a single blockchain with a single Digital Dollar coin. These are not transactions the retail public will ever see. It’s the daily operations of global banks and companies. For these activities, the focus should be on a single type of Digital Dollar
CONMODUM 