The Office of the Comptroller of the Currency (OCC) issued guidelines for implementing the GENIUS Act yesterday, but left unresolved a contentious question—whether third-party platforms can pay interest on stablecoin holdings. The decision has drawn criticism from some who say it sidesteps the intent of the law.
The law prohibits stablecoin issuers from paying interest directly to holders. But the OCC’s newly issued rules dropped a proposed provision that would have barred crypto exchanges and other third-party platforms from offering yield on customers’ idle stablecoin balances. Instead, the agency will evaluate such arrangements on a case-by-case basis.
Room for Interpretation
The OCC’s rationale is that it shouldn’t presume all third-party yield arrangements violate the law. A blanket prohibition, the agency argues, would be inappropriate without evaluating the specifics of each arrangement.
“The OCC gave issuers and their partners more room to offer rewards by backing away from treating certain third-party rewards programs as violations by default,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “This could help attract and retain stablecoin balances, but there’s still some clarity needed about which programs will qualify. I’d say it’s a win in terms of flexibility for commercial players, but it’s not a blanket approval to pay yield.”
The law also tasks the OCC with overseeing compliance with the rules. Banking industry representatives argue that leaving the issue to case-by-case decisions creates uncertainty about how the prohibition on stablecoin interest payments will be enforced.
Concerns from the Banking Industry
Major crypto players, including Circle, the country’s largest stablecoin issuer, and Coinbase Global, welcomed the new rules. Both have long argued that crypto firms should be able to compete with banks on a fair footing.
The American Bankers Association, however, said the OCC’s decision undermines the intent of the ban on stablecoin yield payments. “The result is a final rule that will preserve the status quo for crypto platforms despite Congress’s clear intent to protect local lending,” ABA president and CEO Rob Nichols said.
Banks have warned that yield-bearing stablecoins could draw deposits out of the banking system, giving crypto firms a competitive advantage without subjecting them to the same regulatory requirements as banks. Javelin estimates that the potential shift from demand deposits to stablecoins could range from $257 billion to $1.129 trillion, equivalent to 1.2% to 5.4% of the modeled deposit base.
