Key Insights:
- GENIUS Act rules drop proposed rewards curbs but retain the issuer yield ban.
- Issuers gain reserve flexibility but must keep stablecoins backed at least 1:1.
- Rules start January 18, 2027, with AML and sanctions requirements still pending.
GENIUS Act rules retain the issuer yield ban while dropping a proposed restriction on certain stablecoin rewards arrangements.
The Office of the Comptroller of the Currency finalized the framework, leaving banks’ dispute with crypto firms unresolved. The agency also eased reserve management restrictions while keeping backing, liquidity and risk requirements.
GENIUS Act Rewards Review Leaves Bank Dispute Unresolved
Banks had sought tighter restrictions on rewards paid for holding stablecoins, warning that such payments could drain deposits. They argued that deposit losses could weaken lending, making rewards a central issue during Clarity Act negotiations.
After the bill failed in the Senate in September, banking groups turned to the OCC for tighter rules. Their proposed restrictions targeted rewards on account balances rather than stablecoins used for transactions.
Brooke Ybarra, an American Bankers Association senior vice president, confirmed that position in a recent Crypto in America interview.
However, the final rule removed a proposed presumption that certain issuer arrangements with third parties violate the yield ban. The proposal would have required issuers to rebut that presumption.
The GENIUS Act prohibits issuers from paying holders interest or yield but does not explicitly prohibit third-party rewards.
The OCC will instead review arrangements individually. It will pursue violations and attempts to evade the statutory ban. Banking groups have described the distinction between issuer payments and third-party rewards as a loophole.
An agency official declined to say whether existing exchange rewards programs comply with the GENIUS Act rule, the report showed. “We will just let the market develop and address it as it comes,” the official said.
The OCC could issue additional guidance as the market develops, the official added. Meanwhile, the agency rejected requests to exempt programs established before the law.
Issuers Gain Reserve Flexibility as Redemption Requirements Change
The OCC also dropped a proposed 20-day weighted-average maturity limit on reserve assets. That change allows issuers to hold longer-dated eligible investments, including U.S. Treasuries. Issuers can also withdraw surplus reserves at any time, replacing the proposal’s monthly withdrawal limit.
However, issuers must continue backing outstanding stablecoins at least one-to-one after withdrawing any surplus.
The agency eased certain limits on exposures to individual counterparties while retaining safeguards. Liquidity requirements, counterparty exposure limits and stress-testing obligations remain in place.
The final rule also removes automatic extensions of redemption deadlines during surges in withdrawal requests.
The GENIUS Act news showed that the issuers must notify the OCC within 24 hours when requests exceed 10% of a stablecoin’s outstanding value. That threshold applies to redemption requests received within a single 24-hour period.
A Closer Look at the GENIUS Act Update
The framework outlines federal licensing and supervision for eligible nonbank financial companies, certain bank subsidiaries and foreign issuers.
Its requirements cover capital and custody for issuers operating under the OCC’s jurisdiction. Comptroller Jonathan Gould said the framework sets standards for reserve backing, redemptions and risk management.
The final rule spans more than 700 pages. The OCC became the first federal banking regulator to finalize its core rules under the law. The Federal Reserve and Federal Deposit Insurance Corporation have issued proposals, while Treasury continues separate regulatory work.
The rules take effect January 18, 2027, although the OCC has not announced when issuer applications will open. Anti-money laundering and sanctions compliance rules remain pending. The OCC and Treasury are addressing those requirements through separate rulemaking under the GENIUS Act.
