OCC Final Rule Reopens Debate Over Stablecoin Rewards Under GENIUS Act

The U.S. Office of the Comptroller of the Currency (OCC) has become the first federal banking regulator to finalize rules under the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. Under the new requirements, U.S. crypto exchanges that already offer rewards to stablecoin holders will need approval from the agency for their existing programs.

The OCC, which supervises national banks and trusts expected to play a major role in stablecoin issuance, released its final rule on Wednesday. The regulations outline how companies issuing dollar-pegged tokens must operate, including their relationships with third-party platforms where those stablecoins are traded.

The independent Treasury Department bureau has not provided specific examples of reward programs that would violate the GENIUS Act. The law prohibits payments made “solely in connection with the holding, use, or retention” of payment stablecoins. Because the final rule does not grant existing programs automatic protection, companies will have to navigate the OCC’s case-by-case oversight to determine whether their offerings comply. The rule is scheduled to take effect on January 18.

The regulator said it would assess each arrangement according to the law’s wording and the circumstances involved. It also highlighted the importance of the word “solely,” suggesting that rewards provided at least partly for other reasons may fall outside the prohibition.

Payment stablecoins are designed to maintain a stable value, generally by tracking the U.S. dollar, unlike cryptocurrencies that experience significant price fluctuations. Tether’s USDT and Circle’s USDC dominate the sector, although additional issuers are entering the market.

The extensive rule released Wednesday establishes procedures for regulated companies and foreign firms seeking to issue stablecoins in the United States. It also addresses custody requirements and the relationships between issuers and third-party service providers. However, the framework will operate alongside additional regulations being developed by other federal agencies, while Bank Secrecy Act provisions remain under the responsibility of other Treasury Department bodies.

Treasury Secretary Scott Bessent said the OCC’s final rule advances the landmark legislation by creating a practical framework to support private-sector innovation, competition and U.S. leadership in digital assets.

Despite the broader regulatory progress, the question of stablecoin rewards remains a major point of contention.

Stablecoin Rewards Remain a Regulatory Flashpoint

Several financial companies, including U.S. crypto exchange Coinbase, already operate rewards programs similar to customer incentives offered by credit card providers. PayPal and Kraken are among the platforms offering comparatively high returns on eligible stablecoin holdings.

The GENIUS Act’s restriction on stablecoin issuers paying interest-like returns directly to token holders has generated significant debate. The proposal attracted numerous public comments before the OCC finalized its regulations.

Traditional banks have argued that these programs could threaten customer deposits, which are central to their business models. Banking groups pushed for changes to the GENIUS Act through the proposed Digital Asset Market Clarity Act and continued campaigning for tighter restrictions. The dispute contributed to a lack of unanimous Republican support during a key Senate vote last month, preventing the market-structure bill from advancing.

Without the proposed amendments, the existing GENIUS Act remains the governing standard for exchanges and other companies offering stablecoin rewards. Banks concerned about competition from these products must continue operating under the current law, even as bank deposits have continued to grow amid increasing interest in stablecoins.

The OCC’s final rule also addressed comments arguing that the Digital Asset Market Clarity Act could eventually change the restrictions. The agency said it must implement the GENIUS Act as written unless and until Congress passes new legislation.

When the OCC initially proposed its regulations earlier this year, crypto companies were uncertain about how regulators would enforce provisions designed to prevent firms from circumventing the restrictions on stablecoin yields. Since then, some industry participants have interpreted the regulatory approach as leaving room for certain rewards offered through third-party platforms.

For example, PayPal offers a reported 4% return on PYUSD holdings, Coinbase One provides 3.75% on eligible USDC positions, and Kraken+ subscribers can earn up to 4.5% on USDG accounts.

However, the OCC made clear that programs established before the law was passed would not automatically be considered compliant. The agency also noted that lawmakers’ awareness of existing rewards programs does not necessarily mean Congress approved them.

The final rule also removes certain “rebuttable presumptions” included in the earlier proposal, which had identified specific activities presumed to violate the restrictions unless proven otherwise.

Other Federal Agencies Continue Developing Stablecoin Rules

The OCC’s final regulation is only one part of the broader implementation of the GENIUS Act. The Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. are also working on their own rules, with the OCC’s approach potentially influencing their efforts.

Although the legislation called for a midyear regulatory deadline, several agencies have yet to complete their work.

• Federal Deposit Insurance Corp. (FDIC): The agency issued application standards late last year and proposed its approach to regulating state-chartered institutions in April.
• U.S. Treasury Department: Treasury proposed its framework in August, with particular attention on how foreign issuers such as Tether would be treated. Earlier, in April, the Treasury’s Financial Crimes Enforcement Network and Office of Foreign Assets Control jointly proposed controls for stablecoin businesses, including transaction-stopping and freezing capabilities and compliance with Bank Secrecy Act requirements.
• Federal Reserve: The central bank issued proposals last month outlining how subsidiaries of member banks could issue stablecoins, including requirements for issuance procedures, capital and reserves.

The GENIUS Act’s overall effective date was expected to arrive in January, but the remaining regulatory work and public comment periods make it unlikely that every required rule will be finalized before then.

OCC officials told reporters that the framework could create opportunities for a wider range of institutions, including community banks, to participate in the stablecoin market.

The agency also revised its reserve requirements between the proposed and final versions of the rule. It adopted a principles-based approach to reserve diversification and concentration, supported by requirements for minimum daily liquidity and safeguards against excessive exposure to any single counterparty.

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