US Banks Object to New Stablecoin Rewards Rule
US banks are objecting after the OCC kept the GENIUS Act’s ban on issuer-paid stablecoin yield but dropped a presumption against rewards paid through exchanges and other partners.
Key Takeaways
- OCC drops presumption against third-party stablecoin rewards
- ABA warns partners can deliver equivalent yield
- CEA estimates yield ban lifts lending 0.02%
- Rule takes effect on January 18, 2027
The American Bankers Association set out its objections in an October 21 statement, issued the same day the OCC published its final rule.
What the OCC kept and what it dropped
The GENIUS Act, signed in July 2025, set the first federal rules for payment stablecoins and bars issuers from paying interest or yield solely for holding, using or retaining a token. The OCC’s final rule applies that ban to permitted payment stablecoin issuers and foreign issuers under its jurisdiction. Issuers licensed through other federal or state routes answer to their own regulators.
The February proposal had added a rebuttable presumption: certain arrangements with affiliates and related third parties would count as breaches unless the issuer proved otherwise. The OCC removed it, saying that “because payment stablecoins are a nascent market,” such a presumption was not appropriate at this stage.
Instead, the agency plans to review arrangements through licence applications and ongoing supervision, and it keeps its authority to act against evasion. Two limits remain. An issuer cannot pay an agent to distribute yield it is barred from paying itself, and programmes launched before the Act receive no presumption that they comply.
Three questions now decide whose reward it is
With no presumption to lean on, supervisors have to examine the money behind each programme. Three facts carry most of the weight: who bears the cost of the reward, whether the issuer has any say over the payment, and what the holder must do to qualify. Two programmes advertising the same rate can rest on very different contracts.
| How the reward is funded | How the final rule treats it |
|---|---|
| Issuer pays holders directly | Prohibited by the Act. |
| Issuer pays a platform to distribute the reward | Still the issuer’s payment; routing it through an agent changes nothing. |
| Platform pays from its own revenue | No presumption either way; assessed on the facts. |
| Platform pays while sharing the issuer’s reserve income | No presumption either way; the type of partner arrangement the ABA wanted covered. |
Revenue sharing of this kind already exists. In correspondence with the SEC, Coinbase described its 2023 agreement with Circle, under which the exchange earns a portion of USDC reserve income tied to the amount of USDC held on its platform. Coinbase has also offered USDC rewards to eligible customers. Run through the three questions, the filing answers only part of the first: Coinbase’s income from the deal rises with balances held on the exchange. It leaves open whether rewards are paid out of that income, whether Circle has any say over them and what customers must do to earn them. Those are the facts supervisors would need, and the final rule names no company. For holders, a platform reward remains a promise under that platform’s customer agreement, separate from the issuer’s obligation to redeem the token at par.
Banks object to fixing the harm after it happens
ABA president and chief executive Rob Nichols said the rule contains positive steps but departs from the OCC’s original position on yield. Without the dropped safeguards, he argued, issuers can deliver returns economically equivalent to yield while technically staying outside the prohibition. The statement gave no figures on deposit outflows. Its case is about timing: Nichols said that “attempting to address deposit flight and economic harm after it has occurred” is the wrong approach.
The case for the change
The Blockchain Association said the removal “brings the final rule more closely in line with the statutory text,” according to The Block. The Act’s prohibition is written for issuers, and the group backed a rule that stays within that wording. Chief policy officer Lindsay Fraser said the OCC had given issuers workable standards for reserves, redemption and risk management.
The deposit fight is about which banks keep the money
The bank argument is behavioural. A customer who buys stablecoins to pay a supplier usually spends them quickly. A recurring reward gives that customer a reason to keep a balance in the token rather than in a bank account.
A White House estimate published in April puts numbers on the question. In its report, the Council of Economic Advisers argued that reserves backing stablecoins largely return to the banking system, so a deposit lost by one bank reappears at another. On that basis it estimated that banning yield would raise total bank lending by $2.1 billion, or 0.02%, including about $500 million at community banks. Under assumptions the CEA itself called implausible, community bank lending rose by $129 billion, or 6.7%.
The Independent Community Bankers of America disputes the model, saying it rests on faulty assumptions and noting that community banks hold $4.9 trillion in deposits funding $4.1 trillion in loans. Its objection is about where recycled money lands: the group argues that reserve deposits concentrate at large institutions rather than returning to the local lender that lost the customer. The ICBA made a similar case in an earlier push at the SEC; the ABA is now pressing the point at the OCC.
What to watch after January 18, 2027
The rule takes effect alongside the GENIUS Act on January 18, 2027. The OCC will announce separately when it begins accepting issuer applications, and its first decisions are where the case-by-case review becomes visible.
- Support for the banks’ case: published approvals that set no limits on partner rewards funded through reserve-income sharing.
- Against it: approval conditions or OCC guidance treating reserve-income pass-throughs as issuer yield.
- Other regulators: whether the FDIC and other GENIUS Act regulators match the OCC or adopt a stricter test.
- Congress: the OCC says it must apply the ban as enacted, so broader limits on platform rewards would require new legislation.
This article is provided for informational purposes only and does not constitute legal, financial or investment advice.
Alexander Zdravkov is a market analyst and crypto journalist with interests in economics, broader financial markets and digital assets. His journey into crypto began more than four years ago, driven by a fascination with the rapid evolution of blockchain technology and the transformative potential of decentralized finance. He began analyzing market cycles and identifying emerging trends before they reach the mainstream. He holds a degree in International Relations - a background that helped shape his broader perspective on global economics, geopolitics, and the interconnected nature of modern financial markets. Whether covering the latest developments in the crypto sector or exploring broader macroeconomic themes, Alexander focuses on giving readers context rather than simply repeating headlines. During his career, he has authored more than 5,000 articles covering cryptocurrencies, traditional finance, and global market developments. His work spans everything from Bitcoin and altcoins to macroeconomic trends influencing risk assets worldwide.
