Stablecoin Interest, Yield, and Rewards: OCC Proposes Sweeping Regulations Under the GENIUS Act

Key Takeaways

• The Office of the Comptroller of the Currency (OCC) recently proposed rules to implement the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act).
• The OCC’s proposed rules would expand the GENIUS Act’s prohibition on paying interest or yield to stablecoin holders, applying the prohibition to affiliates and third parties, not just issuers.
• Those in the financial services sector should consider submitting comments on the OCC’s proposed rules, as the implications for financial stability and competitive equity have the potential to affect all participants in the industry.
• There is potential for both overlap and divergence in how various regulatory agencies will address the new requirements imposed by the GENIUS Act, so affected parties need to remain informed about developments in this area.

Background

The OCC issued a notice of proposed rulemaking (NPRM) last week to implement the GENIUS Act, enacted on July 18, 2025. The NPRM is significant, as it creates a new Part 15 to the OCC’s regulations addressing payment stablecoins, including permissible activities, reserves, capital requirements, application processes, disclosures, redemptions, and more. It requests public consideration and input on more than 200 questions, set out over nearly 300 pages of commentary. 

This Update focuses on the prohibition on paying interest or yield to stablecoin holders, including through arrangements with affiliates and related third parties. The stablecoin yield topic was actively debated leading up to the passage of the GENIUS Act, and it has emerged as one of the major issues in the ongoing debate over the comprehensive market structure bill that remains under consideration in the Senate. While the GENIUS Act prohibits stablecoin issuers from directly paying interest, it remains silent on whether affiliates or third parties may offer rewards or yield programs related to stablecoin use. In fact, this issue has effectively stalled any momentum that the market structure bill had, as the banking industry pushes for more extensive prohibitions on interest-bearing stablecoins, while certain digital asset industry players insist that the intent of the GENIUS Act was to leave open the opportunity for affiliates or third parties to provide stablecoin yield. 

This NPRM will have significant implications for market participants across the financial services industry, as the GENIUS Act has designated the OCC as the “primary Federal payment stablecoin regulator” for a number of potential permitted payment stablecoin issuers. We encourage all affected clients, including traditional banks, stablecoin issuers, digital asset exchange and wallet platforms, and brands considering white-labeled stablecoin offerings, to consider submitting comments—not only on the yield topic—during the 60-day comment period, which closes on May 1, 2026.

The Statutory Prohibition on Interest and Yield

Section 4(a)(11) of the GENIUS Act prohibits permitted payment stablecoin issuers (Issuers) from paying "the holder of any payment stablecoin any form of interest or yield (whether in cash, tokens, or other consideration) solely in connection with the holding, use, or retention of such payment stablecoin." This prohibition applies to both domestic Issuers (whether state or federally regulated) and foreign Issuers registered with the OCC. 

The OCC's Proposed Prohibition on Interest and Yield

Section 15.10(c)(4) of the OCC’s proposed rule appears identical to the yield or interest prohibition in § 4(a)(11) of the GENIUS Act. In § 15.10(c)(4)(i), however, the rule goes on to specify that there is a rebuttable presumption that an Issuer is violating the prohibition if it has a contract, agreement, or other arrangement with an affiliate or related third party to pay such interest or yield. In this regard, the OCC’s proposed rule is decidedly more restrictive than the GENIUS Act in that it establishes a prohibition against indirect methods of paying yield, casts a wider enforcement net, and places higher compliance burdens on Issuers who might want to rebut the presumption that the Issuer is violating the yield prohibition. By way of rationale, the NPRM states, “[t]he OCC’s approach is intended to ensure that the prohibition cannot be circumvented through indirect or creative structuring, and to maintain a level and safe playing field among deposit-taking institutions, payment stablecoin issuers, and the broader financial system.” In brief, the OCC’s thesis for the more restrictive rule seems to assume that affiliate or third-party yield was intended to be prohibited by the GENIUS Act.

The rebuttable presumption under the OCC’s proposed rule extends the yield prohibition beyond just Issuers to also include any affiliate or “related third party” from paying interest or yield. The proposed rule defines "related third party" broadly to mean “(A) [a] person offering to pay interest or yield to stablecoin holders as a service; and (B) [a]ny person that the issuer issues stablecoins on the person’s behalf or under the person's branding.” § 15.10(c)(4)(ii). In other words, a “related third party” could capture any exchange or third-party wallet service that supports a stablecoin under subsection (A), and it could also capture the brand associated with any white-label or co-brand stablecoin under subsection (B). 

Rebutting the Presumption

Under § 15.10(c)(4)(iii) of the proposed rule, “[a] permitted payment stablecoin issuer may rebut the presumption [that the issuer has violated the yield prohibition] … by submitting written materials that, in the OCC’s judgment, demonstrate that the contract, agreement, or other arrangement is not prohibited under paragraph (c)(4) of this section and is not an attempt to evade the prohibition.” Notably, the Issuer would need to address the prohibition specified by the OCC’s rule (under paragraph (c)(4) of § 15.10), which, as noted above, is stricter than the prohibition specified by statute under the GENIUS Act. 

Merchant Discount and White Label Considerations 

The OCC commentary clarifies that the yield prohibition "is not intended to prevent a merchant from independently offering a discount to a payment stablecoin holder for using payment stablecoins." NPRM at 40. This carve-out for merchant discounts highlights the way the OCC thinks about the distinction in the regulatory framework—i.e., transaction-based incentives offered independently by merchants fall outside the scope of the prohibition, whereas yield or interest tied to holding stablecoins over time remains prohibited. The OCC further indicates that the yield prohibition “is also not intended to prevent a permitted payment stablecoin issuer from sharing in the profits derived from the payment stablecoin with a non-affiliate partner in a white-label arrangement.” NPRM at 40. This commentary suggests the OCC will not object to an Issuer paying yield or interest to a “related third party,” to the extent such payment is structured as a form of profit sharing in a co-brand or white-label arrangement. However, any such profits presumably cannot further be paid out by such related third party due to the restrictions under § 15.10(c)(4).

OCC Questions: Opportunities for Industry Input

In Questions 35 – 39 of the NPRM, the OCC has posed several questions signaling openness to feedback on the topic of yield prohibitions. Those questions include: a general request for clarification; whether a de minimis exception should be included; whether safe harbors should be proposed for arrangements that do not violate the prohibition; whether the prohibition should be broadened to cover "direct or indirect" payments; whether further clarifying definitions should be added; what types of rewards should be subject to the prohibition; and what the economic impact of narrower versus broader prohibitions would be, including on bank deposits. These questions present a significant opportunity for stakeholders to shape the parameters of the final rule.

Policy and Practical Considerations and the Broader Legislative Context

The banking industry has raised legitimate concerns about financial stability and competitive equity. If stablecoin-related products offer yield without being subject to the same regulatory requirements as bank deposits, including deposit insurance assessments, capital requirements, and consumer protection obligations, this could create an unlevel playing field and potentially contribute to deposit outflows. 

By way of response to these concerns, the digital asset industry has highlighted that under the GENIUS Act, Issuers are far more limited in the types of activities and investments they may undertake with respect to the reserve assets that back stablecoins, as compared to the fractional reserve and investment practices permitted for banks with respect to bank deposits. Digital asset industry participants have also argued that stablecoin reward and incentive programs serve purposes that are different than traditional interest payments, and given this, the OCC should not automatically prohibit such programs. Further, the digital asset industry has argued that Congress intentionally left the door open for affiliate and third-party interest or rewards when it passed the GENIUS Act and declined to apply any yield prohibition to parties beyond the Issuer.

As a practical matter, while stablecoin issuers such as Circle (issuer of USDC) and Paxos Trust (issuer of PayPal’s PYUSD) do not directly pay interest to holders, affiliated platforms and intermediaries have continued to offer yield on these stablecoins. For example, Coinbase currently offers yield on certain USDC holdings, while PayPal offers yield on PYUSD. These platforms characterize such payments as "platform rewards" rather than issuer-paid interest, which is consistent with the position that the GENIUS Act prohibition applies only to issuers, not intermediaries. These yield offerings may compete with traditional savings deposit products.

Potential for Divergent Regulatory Approaches

The OCC is not the only federal regulator implementing the GENIUS Act. The Federal Deposit Insurance Corporation (FDIC) released a notice of proposed rulemaking related to certain application provisions under the GENIUS Act on December 19, 2025. In the context of reserve asset custody requirements under Section 10 of the GENIUS Act, the OCC "recognizes that multiple agencies will regulate stablecoin issuers" and acknowledges "there may be overlap between the requirements imposed by different regulators." The OCC has invited comment on "the best ways to manage potentially overlapping requirements."

However, with respect to the interest prohibition under Section 4(a)(11), the OCC's proposed rebuttable presumption framework for affiliate and third-party arrangements appears to be the OCC's own interpretive approach. The proposal does not reference coordination with other primary federal payment stablecoin regulators (such as the FDIC or Federal Reserve) on this particular issue, nor does it reference coordination with any state regulators that may oversee a state-qualified payment stablecoin issuer under the GENIUS Act. This raises the possibility that other agencies or states may adopt different approaches to interpreting and enforcing the interest prohibition, potentially creating regulatory uncertainty or arbitrage opportunities, depending on an issuer's primary regulator. Stakeholders may wish to address the importance of interagency consistency on the interest prohibition in their comment letters.

The GENIUS Act becomes effective on the earlier of 18 months after enactment (i.e., January 2027) or 120 days after the primary federal payment stablecoin regulators issue final implementing regulations. If finalized before January 2027, the OCC's proposed regulations would provide guidance on which arrangements comply with the prohibition prior to that date. 

Recommendations

We encourage all affected clients to: (1) submit comments during the 60-day comment period to share perspectives on the appropriate scope of the prohibition and the proposed rebuttable presumption framework, (2) evaluate current arrangements to assess how existing business relationships would be treated under the proposed rule, and (3) engage with industry groups to ensure the OCC receives comprehensive input from diverse stakeholders on this NPRM.