“We therefore conclude that a bank may validate, store, and record payments transactions by serving as a node on an INVN [independent node verification networks].” —Jonathan V. Gould, Senior Deputy Comptroller & Chief Counsel

On January 4, 2021, the U.S. Office of the Comptroller of the Currency (OCC) published an interpretive letter and guidance allowing for federally regulated banks to participate in public blockchain networks and use stablecoins to perform bank-permissible activities.

This news, along with the announcement in July 2020 that banks and thrifts could serve as cryptocurrency custodians, could open the floodgates for technological innovation in the American banking sector. The benefits of such adoption would be felt not only by the banks and their clients but by the crypto ecosystem as a whole.

Wow. US banks can now use blockchain-based stablecoins as settlement infrastructure.

Amazing news for #Ethereum, and what it may mean for impactful stablecoin activity in DeFi / permissionless finance. https://t.co/Dir6MVzpJm

— DCinvestor | Aftab (@iamDCinvestor) January 4, 2021

Opportunities and challenges

Banks have long been aware that blockchain and distributed ledger technology could be a game changer for the industry. From settlement to cross-border payments to syndicated lending, there are a wide array of services that could be improved with the use of this type of secure, fast, and programmable technology.

Blockchain technology can allow for services to be available 24/7, with faster transaction speeds, and lower transaction processing costs. McKinsey estimated that “blockchain-based solutions for customer onboarding can create up to $1 billion of savings in operating costs for retail banks globally and reduce regulatory fines by $2 billion to $3 billion. In addition, [they] expect blockchain solutions to reduce annual losses from fraud by $7 billion to $9 billion.”

Until this letter, US banks could only develop private or permissioned blockchains, a costly and labor-intensive endeavor with few advantages over traditional distributed databases. Using public blockchains will allow banks to develop services using blockchains more simply and quickly, and with the ability to scale almost immediately.

Although easier than building a private blockchain, connecting public blockchains into a bank’s complex systems requires extensive research, development, and testing. The biggest question is “What chain or chains best serve the needs of the bank?”

Every protocol, such as Bitcoin, Ethereum, Celo, or Algorand, has a unique design, with its own benefits of use and challenges for development. Banks must consider their priorities, particularly security, and analyze every option for its functionality as well as its infrastructure requirements and setup.

Huge news today - @BrianBrooksOCC's letter about banks participating in running nodes on public blockchains (such as @CeloOrg) and using stablecoins (such as $cUSD) to "conduct payment activities and other bank-permissible functions". 💪💪💪 https://t.co/LPribBAABS

— Rene | Celo (@followrene) January 4, 2021

Bison Trails enables participation

Bison Trails is the leading infrastructure-as-a-service provider that specializes in working with open blockchains suitable for the banking sector, like Bitcoin and Ethereum, along with 20+ other protocols. We currently work with top tier custodians, exchanges, fintech companies, data and analytics providers, and wallets, providing both Participation and QT (Query & Transaction) clusters.

Initially, most banks will not require full network participation via validation nodes (in Participation clusters). Most desired banking functions will require read/write nodes. Our product, QT, provides enterprises with a robust link between off-chain systems and blockchain networks.

How banks can use QT today

Banks can use QT to read data, monitor account balances, or create and monitor transactions to make sure that they make it onto the chain. We make it incredibly easy for an enterprise to have secure, highly available access to read/write node infrastructure on multiple blockchain protocols.

Before evaluating public blockchains, a bank should first identify the products and services they are interested in providing to their customers with this new technology. When they are ready to begin the research process, a bank can benefit from our extensive protocol knowledge and first-hand experience building with blockchains by reaching out to the team to learn more about what kind of infrastructure and network will best suit the bank’s needs.

The OCC’s guidance brings a whole new world of businesses and institutional users into the crypto space. Many banks were previously reluctant to get involved because of the regulatory uncertainty or lack of clarity on what they were and were not allowed to do. The best and most pragmatic way to gain mainstream adoption of crypto is widespread adoption in the existing financial system.

Joe Lallouz, CEO

Once a choice is made, and a bank becomes a Bison Trails customer, nodes can be spun up to a blockchain’s testnet so the bank can deploy and test its code. Our team can then conduct operational testing if the bank wants to further evaluate any solutions prior to the mainnet phase. When everything is ready for production, the bank can spin up mainnet nodes and begin to operate with their customers.

Although most banks are likely to start with a single blockchain, if they want to add support for another chain they can easily add a new node on one of the 20+ protocols supported by our platform.

Bison Trails is able to meet the demands of enterprise customers building applications that rely on real-time blockchain data with high throughput, high availability, and dedicated resources. Today our QT infrastructure processes billions of queries and transactions per month for our customers.

Each QT cluster, composed of fully-managed read/write nodes and their supporting infrastructure, provides enterprise-grade security, near-infinite redundancy, and authenticated API access to blockchain data.

Contact us to learn more about QT or to consult with our protocol experts about adding support for a specific protocol.

Contact Us

About Bison Trails

Pioneering Blockchain Infrastructure®

Bison Trails is a blockchain infrastructure company based in New York City. We built a platform for anyone who wants to participate in 20 new chains effortlessly. We also make it easy for anyone building Web 3.0 applications to connect to blockchain data from 30 protocols with QT. Our goal is for the entire blockchain ecosystem to flourish by providing robust infrastructure for the pioneers of tomorrow.

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