OCC GENIUS Pitch Puts Dark Cloud on Crypto Stablecoin Model

The OCC's newly proposed stablecoin rules under the GENIUS Act could upend the crypto industry's reward and yield arrangements, threatening partnerships like the one between Circle and Coinbase. Acting Comptroller Jonathan Gould testified before the U.S. Senate on Thursday, even as industry participants scrambled to digest a 376-page proposal that would regulate domestic stablecoin issuers in ways many did not anticipate. The draft rulemaking suggests that close financial ties between issuers and crypto exchanges handling their tokens may constitute an improper evasion of the law's prohibition on interest and yield payments.

OCC Proposal Targets Stablecoin Yield Arrangements

The U.S. Office of the Comptroller of the Currency released a 376-page proposed rulemaking that would regulate domestic stablecoin issuers under the Guiding and Establishing National Innovation for U.S. Stablecoins Act, better known as the GENIUS Act, which was signed into law last year. The allowance of stablecoin yield and rewards has been a central component of both the GENIUS Act and the follow-up legislation called the Digital Asset Market Clarity Act, which carries even greater significance for the broader crypto regulatory framework.

Under the proposal, close financial relationships between stablecoin issuers and crypto platforms that distribute their tokens would create a strong presumption that yield or interest payments made through such intermediaries represent an attempt to circumvent the GENIUS Act's ban on interest and yield payments, according to the OCC. Firms may push back against that presumption, the agency noted, provided the issuer supplies sufficient evidence to the contrary.

The crypto industry has long operated under the belief that the GENIUS Act's prohibition on yield offered directly by issuers does not apply to third parties running their own rewards programs on those tokens. Coinbase, for instance, has built a significant stablecoin rewards business under precisely that interpretation. The OCC's proposed language now challenges that reading by presuming certain third-party relationships would improperly evade the statutory prohibition, though lobbyists and attorneys are still parsing the details.

What Do the OCC's Proposed Stablecoin Rules Mean for Crypto Rewards?

The proposed rules do not appear to constitute an outright ban on stablecoin rewards, but they cast significant doubt on the industry's preferred legal interpretation. Industry insiders who spoke on condition of anonymity acknowledged that the initial language looks unfavorable, and companies plan to mount an aggressive campaign to seek changes during the comment period. Some participants noted the agency's wording may leave enough flexibility that continued rewards programs could ultimately survive.

Todd Phillips, a former lawyer at the Federal Deposit Insurance Corp. and a business professor in Georgia who tracks digital assets policy, told reporters on Thursday that the proposed language does not seem like an absolute prohibition. Phillips said there is some play in the joints of what the OCC has proposed, indicating room for negotiation.

Phillips added that the OCC has clearly gone beyond what the statute requires, and that the extent of the restriction remains open to debate. The agency did not immediately respond to questions about the rulemaking.

I think there's some play in the joints of what the OCC has proposed. The OCC has clearly gone beyond what the statute requires.

— Todd Phillips, former FDIC lawyer and business professor

Stablecoin Yield Becomes Flashpoint in Clarity Act Negotiations

The crypto industry's primary policy objective in Washington remains advancing the Clarity Act's regulatory framework for the broader U.S. digital asset market. Within those legislative negotiations, stablecoin yield has emerged as one of the most contentious issues, with American bankers arguing that such yield threatens their foundational reliance on customer deposits. The crypto side has repeatedly contended that the GENIUS Act, as written, permits third-party crypto firms to offer rewards on stablecoin holdings and activities.

One insider involved in the negotiations told reporters on Thursday that the OCC's action should actually weaken the banks' lobbying position, reasoning that there is little sense in debating stablecoin yield in additional legislation when the banking regulator has already addressed it through proposed rulemaking. Despite that argument, the same source acknowledged the OCC overreached and predicted the industry will fight the proposed rules even as the Clarity Act progresses through Congress.

The proposals put forward by Gould, a former chief legal officer at Bitfury who has otherwise been broadly supportive of the crypto sector, have shaken industry confidence that the GENIUS Act will protect stablecoin rewards programs. These programs represent a substantial revenue stream for Coinbase, which has not made any public statements on the matter. A company spokesperson declined to comment.

How Will This Affect the Broader Crypto Regulatory Landscape?

The preliminary rulemaking from the OCC, which charters and oversees national banks and trusts across the United States, opens the proposals to a public comment period that must be followed by a final rulemaking process. Controversial rules of this nature typically require months of discussion and review before any final version takes effect, giving the industry substantial time to shape the outcome.

If the OCC ultimately eliminates the ability of crypto platforms to extend stablecoin yield to customers, it could remove one of the key sticking points in the Clarity Act negotiations. However, other unresolved matters continue to stand in the way of the bill. Democratic lawmakers have insisted, for example, that the legislation address potential conflicts of interest posed by senior government officials, such as President Donald Trump, personally profiting from the crypto industry.

At a Thursday hearing before the Senate Banking Committee, stablecoin rewards came up repeatedly as a business model that unsettles the banking sector. Regulators testified they have not yet observed a significant flight of deposits from banks. Senator Angela Alsobrooks, a Democrat, pressed for a compromise within the Clarity Act that would ban the crypto industry from offering rewards on stablecoin holdings in a manner resembling a deposit account. Negotiations among the political parties, banks, the crypto industry, and the White House have not yet yielded a deal that can advance to a Senate vote.