OCC’s GENIUS implementation draft rule keeps yield on the table

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• Key insight: The Office of the Comptroller of the Currency’s proposed implementation rules for stablecoins includes a rebuttable presumption against yield arrangements, but experts say there are sufficient caveats in the language that such arrangements could ultimately be allowed.
• Supporting data: The OCC is taking comment on the proposed rule until May 1, and changes to the final rule on how aggressively to prohibit yield or rewards arrangements are still possible. 
• Forward look: Experts say the legal landscape around stablecoin yield is still in flux, with Congress continuing to debate a crypto market structure bill and the potential for future litigation to shape the ultimate reach of the rule. 

The Office of the Comptroller of the Currency’s proposed rule implementing the GENIUS Act bars platforms from paying yield on stablecoins held in custody, but a flexible “rebuttable” standard — as well as fluid negotiations on crypto market structure in Congress and potential future litigation — means the issue is far from settled.

Experts like Jaret Seiberg, policy analyst at TD Cowen say the agency’s draft regulation leaves the door open to platforms paying yield on stablecoins, something that he says is not enough to satisfy banks, who’ve long advocated for explicit, sweeping bans on platforms paying yield on consumer stablecoins. 

“The first problem is that the OCC could change its view in response to comment letters. Such a change would likely be after CLARITY became law,” Seiberg wrote. “In addition, issuers and platforms could adjust their terms to avoid being captured by the OCC’s presumption. This means the payment of yield on stable coins likely will exist in some form.”

The GENIUS Act prohibits stablecoin issuers from paying interest or yield on payment stablecoins it issues, but bank industry advocates have argued the law’s language permits a workaround in which third-party exchanges or affiliates offer “rewards” instead, similar to what many credit cards offer their customers. Since the passage of the law, banking industry groups have expressed concern that the law could divert $6.6 trillion of deposits away from traditional banks, citing an estimate from the U.S. Treasury Borrowing Advisory Committee.

The OCC proposal appears to have taken those concerns to heart, establishing a rebuttable presumption that stablecoin-linked rewards arrangements violate the law. However, according to the proposal, whether a payment stablecoin issuer is presumed to be paying prohibited interest or yield depends on the technical structure of their agreements with third parties.

“The OCC would presume that a permitted payment stablecoin issuer is paying the holder of any payment stablecoin any form of interest or yield … if [the] issuer has a contract, agreement, or other arrangement with an affiliate … to pay interest or yield … [or] the affiliate or related third party has a contract, agreement, or other arrangement to pay interest or yield to a holder of any payment stablecoin … solely in connection with the holding, use, or retention of such payment stablecoin,” the proposed rule states. 

The proposed rule also says that stablecoin issuers cannot avoid yield restrictions through so-called “white label” third party arrangements, whereby a stablecoin issuer also controls the stablecoin payment infrastructure, while a third party brands and markets the asset.

Gibson Dunn lawyers Rosemary Spaziani and Jason J. Cabral said in an analyst note that the restriction is wide and prioritizes the effective dynamic of a relationship over narrow definitional prohibition. 

“The prohibition is not limited to traditional interest payments and it potentially encompasses balance-based rewards, rebates, loyalty tokens, profit-sharing arrangements, or other economic benefits tied to holding stablecoin balances,” Spaziani and Cabral wrote in the note. “The formal legal separation between the issuer and a third-party partner will not be dispositive if economic substance suggests compensation for passive holding.”

Speaking on a panel on stablecoins at the Milken Institute’s 2026 Future of Finance conference, former Commodity Futures Trading Commission Acting Chairman Caroline Pham said that despite “a lot of froth on crypto Twitter,” about the language, she called the proposal straightforward.

“The draft basically said, ‘Yes, you can go ahead and pay rewards to users of your stablecoin,’ [and] it has a rebuttal presumption I like to call the ‘looks like a duck’ test,” said Pham, who is now the Chief Legal Officer at crypto firm MoonPay. “If it looks like a merchant rewards program … then that’s okay, if it’s a lookalike deposit account, a lookalike checking account, a lookalike savings account, a lookalike money market fund, that’s not okay. … That’s a pragmatic path forward.”

Banking lawyers disagree, however, over how restrictive the draft is. 

Todd Phillips, an assistant professor at Georgia State University and former attorney for the Federal Deposit Insurance Corp., said there continues to be debate over how to read the language.

“I know the crypto industry seems very upset and says that it ends up prohibiting yield. I think the banking industry says this does not prohibit the payment of yield,” Phillips said. “I don’t read it as prohibiting the situation that Coinbase has, but other people do.”

Pham said the proposal leaves sufficient room for interpretation. But the forthcoming comment period is precisely the venue for those debates to take place. 

“The agencies have to write rules anyway to implement this,” Pham said. “I’m pleased to see that the OCC, which is pro-innovation under [Comptroller of the Currency Jonathan] Gould, is moving forward on creating those rules that are necessary. And there’s a comment period. So let’s get to work — good policy is hard work. Let’s really dig into the nitty gritty and see how this should come out.”

Ian Katz, managing director at Capital Alpha Partners, said in an analyst note that what seems like a straightforward ban on yield would allow issuers to challenge an arrangement presumed to be in violation of the law, giving issuers one avenue to have yield-adjacent arrangements be approved. A forthcoming crypto market structure bill — which is being held up by disagreements between the banking and crypto industries about yield — could also complicate the picture further. 

“The language appears to have a more negative bias than the crypto industry expected. However, there’s a divergence of opinions on just how restrictive the proposal is,” Katz wrote. “The proposal is open to a 60-day comment period and can be changed [and] could be overridden by language in the CLARITY Act, if Congress passes that.”

Crypto advocates like Robin Cook, Director of U.S. Policy at Coinbase, say third-party incentives are distinct from issuer-paid interest. 

“What GENIUS did is it said that there is a ban on the payment of interest and yield by stablecoin issuers. What it did not say — because this was an issue that was actually [debated] and decided on the Senate floor — was that third parties can’t pay incentives for the use of stablecoins,” said Cook, speaking at the Milken panel Tuesday. “In order for a stablecoin to actually come to being … you have to provide an incentive for them to be able to do that, so I think where this is going is ultimately, where do you draw that line.” 

Yield has been one — but not the only — sticking point holding up the CLARITY Act, a crypto market structure bill that Congress has been mulling for over a year. Banks view the bill as their best chance to enact more restrictive language barring stablecoins from competing with interest banks pay on deposits. 

Major players in the crypto industry have balked at the inclusion of more restrictive language in the market structure bill. Coinbase CEO Brian Armstrong withdrew his support for the market structure bill in January over the issue and a markup in the Senate Banking Committee was subsequently canceled. Katz says Congress is likely to act either way.

“Some have opined that the OCC proposal may make it unnecessary for Congress to deal with interest/yield/rewards in the CLARITY Act,” Katz wrote. “We would be surprised if Congress takes a pass.”

Brookings scholars, including former Treasury undersecretary for domestic finance Nellie Liang and former New York Federal Reserve Bank President William C. Dudley, said in a recent paper that they support maintaining a prohibition of interest and rewards for the time being, but argue that claims of macroeconomic harm may be overstated. Banks may just have to offer higher incentives to customers to compete.

“While we come down on the side of preserving — at least for a while — a prohibition of interest and rewards so stablecoins can further develop their payment functionality and reduce the risk of unintended consequences, we believe the argument that a resulting reduction in bank credit provision would be enough to harm the economy is overstated,” the researchers wrote in a recent note. “Banks are responding to competitive threats to offer better payments services by using tokenized deposits, speeding payments with FedNow, and improving their mobile apps — and can also adjust deposit yields to keep those customers they are most vulnerable to losing.”

Seiberg argued that even if a higher standard is ultimately adopted, challenges to the ban through litigation and workarounds ultimately mean banks are fighting an uphill battle in trying to prevent any incentives on stablecoins. 

“With the Chevron doctrine repealed, the OCC does not get deference in interpreting the GENIUS Act and Congress did not specifically bar platforms from paying interest or issuers from paying marketing fees to platforms,” Seiberg wrote. “To us, the banks will eventually lose on this issue politically as they are arguing against consumers getting paid money.”