On the evening of October 21, the U.S. Office of the Comptroller of the Currency (OCC) issued final rules implementing the GENIUS Act. The rules retain the prohibition against issuers paying interest or yields to users solely for holding, using, or retaining payment stablecoins, but remove the rebuttable presumption of illegality regarding certain arrangements between some issuers and their affiliates or third parties that was included in the draft.
Cryptocurrency industry groups welcomed this adjustment, while banking associations voiced opposition. The Independent Community Bankers of America (ICBA) reiterated its analysis: if payment stablecoins become widely adopted, community banks’ loan portfolios could shrink by at least $850 billion in the future.
The ban remains, but the presumption is gone
Implementation of the GENIUS Act is being carried out by multiple regulatory agencies. The Federal Reserve proposed related implementation rules in late September, the Federal Deposit Insurance Corporation (FDIC) and the U.S. Department of the Treasury are also advancing their respective rulemaking efforts, while the OCC has already published its final rules.
The OCC’s final rules apply to eligible payment stablecoin issuers within its jurisdiction, foreign issuers, and certain custody activities supervised by the OCC. Rules related to anti-money laundering, the Bank Secrecy Act, and sanctions will be formulated separately by the relevant authorities.
For the cryptocurrency industry, two aspects are most practical. Non-bank entities can apply to become federally qualified issuers, with the OCC stating it will announce the start date for accepting applications separately. Foreign issuers are also included: to issue in the United States, their home jurisdiction’s regulatory framework must be deemed substantially equivalent to U.S. statutory requirements by the U.S. Department of the Treasury, and they must register with the OCC. An analysis by the law firm Manatt during the proposal stage highlighted that this would significantly impact foreign issuers such as Tether. According to DefiLlama, USDT accounts for approximately 60% of the total stablecoin market capitalization.
The final rules will take effect on January 18, 2027. Qualified issuers must support outstanding payment stablecoins with legally permissible reserve assets at a ratio of at least 1:1 and establish timely redemption policies that meet prescribed redemption timeframe requirements.
The core of the ban is that issuers may not pay yields solely because customers hold, use, or retain stablecoins. With the presumption removed, such transactions are no longer automatically considered violations; instead, they will be reviewed on a case-by-case basis, allowing for enforcement against circumvention. The OCC stated that the stablecoin market is still nascent and it is inappropriate to adopt a predetermined stance at this stage. It also did not grant amnesty to existing projects: existing reward arrangements do not automatically receive compliance exemptions as a result.
A sigh of relief, but not yet approval
The Blockchain Association, a cryptocurrency industry group, supported this change, arguing that the final rules align more closely with the text of the Act.
Coinbase is the most direct beneficiary. In 2025, its stablecoin revenue reached $1.35 billion, a significant portion of which came from its revenue-sharing agreement with Circle for USDC. Coinbase CEO Brian Armstrong has previously cited reward programs as a key factor driving users to choose this exchange.
Data disclosed by Circle highlights the significance of this revenue-sharing arrangement. In the first half of 2026, Circle reported revenue of approximately $1.4 billion, of which about $819 million—roughly 59% of total revenue—was paid to distribution partners and used to cover transaction costs. The company stated that net profit accounted for approximately 7% of revenue. These figures are based on Circle’s own reporting standards. Distribution channels represent a core cost in the USDC business model; the sustainability of reward programs is directly tied to the continued viability of these channels.
PayPal’s PYUSD offers another case worth monitoring: PYUSD is issued by Paxos, while PayPal provides holding rewards to eligible users. Whether this arrangement complies with the final rule depends on an assessment of the specific business structure and regulatory jurisdiction.
An Associated Press report interpreted the rule as allowing exchanges to continue offering interest-like rewards, while some analysts pointed out that the absence of a safe harbor means gray areas persist. Both perspectives have merit, as the Office of the Comptroller of the Currency (OCC) removed presumptions of illegality, not the scope of regulatory review.
The user experience resembles credit card cashback or money market funds such as Yu’e Bao: funds generate returns simply by being held. However, regulators do not focus on user experience or nomenclature, but rather on the economic substance of the specific arrangements. Factors influencing compliance determinations include whether rewards are generated solely from holding, using, or retaining stablecoins, and the nature of commercial relationships between issuers and third parties. While the OCC removed certain presumptions of illegality, it did not thereby deem existing reward programs universally compliant.
Banking Sector Opposition
The American Bankers Association (ABA) stated that the provisions removed were precisely the safeguards against indirect arrangements involving affiliates, exchanges, and other distribution partners, meaning the rule will allow crypto platforms to maintain their existing business models unchanged. Rob Nichols, CEO of the ABA, argued that waiting until deposit outflows occur and economic damage materializes before taking action is not the correct approach. The banking industry lobby group, the Bank Policy Institute, sided with the ABA, asserting that removing these presumptions replaces clarity with ambiguity.
The Independent Community Bankers of America (ICBA) estimated that if payment stablecoins become widely adopted, community bank lending could decrease by at least $850 billion in the future. This figure represents a scenario-based projection proposed by the association, rather than realized losses.
Research released in April this year by the White House Council of Economic Advisers (CEA) yielded more moderate baseline results: a comprehensive ban on stablecoin yields was projected to increase bank lending by only about $2.1 billion, accounting for 0.02% of total loans. Only after incorporating multiple extreme assumptions did the model project an increase in new lending of approximately $531 billion, representing 4.4% of total loans.
These two sets of results reflect different models and assumptions; one cannot determine which party is more credible by comparing only the final figures. The key divergences lie in the extent to which the stablecoin market will expand, how much of the reserve assets will continue to support bank credit, and whether banks can secure alternative funding sources to replace deposits.
An Alternative Path for Banks
The banking sector’s response extends beyond mere lobbying. Regulatory definitions of payment stablecoins explicitly exclude deposits, including those recorded on distributed ledgers. Consequently, tokenized deposits remain classified as bank deposits and are not subject to the prohibition on yield-bearing stablecoins. This allows banks to continue paying interest, albeit under existing banking supervision rather than through unrestricted issuance. For platforms such as Coinbase and Circle, this introduces a legitimate, interest-paying competitor into the race for on-chain dollar rewards.
This situation has historical precedents. In the 1970s, the United States imposed interest rate caps on certain bank deposits, prompting money market funds to offer savers an alternative yield option. Legislation enacted in 1980 established a phased removal of these interest rate restrictions, after which banks introduced Money Market Deposit Accounts (MMDAs) to compete with money market funds. Today, tokenized deposits could serve as a similar instrument for banks to respond to competition from on-chain dollars, although the trajectory may differ.
Once the regulations take effect, stablecoin platforms will need to assess whether their existing reward structures comply with regulatory requirements. Meanwhile, banks can simultaneously push for tighter constraints on indirect yield arrangements while exploring alternative products such as tokenized deposits. However, regulatory boundaries constitute only one aspect of competition; even if banks can offer interest-bearing deposits on-chain, it does not guarantee that users will shift to banks. The ability of a product to attract capital also depends on yield levels, use cases, and the convenience of capital flows.
The Office of the Comptroller of the Currency (OCC) adopts a case-by-case review approach for reward arrangements. Subsequent enforcement actions and regulatory interpretations will gradually clarify which practices are permissible and which may constitute circumvention of the ban on interest payments. These determinations will influence not only how stablecoin platforms design their rewards but also the competitive strategies banks employ when launching tokenized deposits. Ultimately, competition in the on-chain dollar space will depend not solely on who can offer yields, but on who can incentivize users to hold and utilize their products within the bounds of regulatory permission.