On January 4, 2021, the Office of the Comptroller of the Currency (OCC) published Interpretive Letter 1174, clarifying the authority of national banks and federal savings associations (FSAs) to participate in independent node verification networks (INVN) and use stablecoins to conduct payment activities and other bank-permissible functions. The letter is intended to remove any legal uncertainty about the authority of banks to connect to blockchains as validator nodes and thereby transact stablecoin payments on behalf of customers.

The letter states that 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. The OCC notes that in deploying these technologies, a bank must comply with applicable law and safe, sound, and fair banking practices.

According to the letter, an INVN consists of a shared electronic database where copies of the same information are stored on multiple computers. One common form of an INVN is a distributed ledger, as used to record cryptocurrency transactions. An INVN's participants, known as nodes, typically validate transactions, store transaction history, and broadcast data to other nodes.

The letter states the OCC's position that the use of stablecoins to facilitate payments allows banks to capture the advantages that INVNs may present in a manner that retains the stability of fiat currency. INVNs can transfer multiple different cryptocurrencies including but not limited to stablecoins. Stablecoins serve as a means of representing fiat currency on an INVN. In this way, the stablecoin provides a means for fiat currency to have access to the payment rails of an INVN.

According to the letter, engaging in INVN within the federal banking system may enhance the efficiency, effectiveness, and stability of payments activities to achieve the benefits of real-time payments already enjoyed in other countries. For example, such activities may be more resilient than other payment networks because of the decentralized nature of INVNs, which allows a comparatively large number of nodes to verify transactions in a trusted manner. An INVN also limits tampering or adding inaccurate information to the database because information is only added to the network after consensus is reached among the nodes validating the information (see Practice Note, Blockchain and Distributed Ledger Technology (DLT): Overview: How Blockchain Works).

The OCC also cautions banks to be aware of potential risks when conducting INVN-related activities, including operational risks, compliance risk, and fraud. The OCC notes that banks have experience with managing such risks, which are similar to those of other electronic activities expressly permitted for banks, including providing electronic custody services, acting as a digital certification authority, and providing data processing services. The OCC states in the letter that it expects banks engaged in providing cryptocurrency services to customers to adapt and expand their BSA/AML compliance programs to assure compliance with the reporting and recordkeeping requirements of the Bank Secrecy Act (BSA) and to address the particular risks of cryptocurrency transactions.

The OCC recommends that banks develop and implement new activities consistently with sound risk management practices and should align with their overall business plans and strategies.