OCC Unveils Sweeping Proposal to Ban Stablecoin Yield Under GENIUS Act

Key Highlights

• Federal regulator proposes comprehensive stablecoin yield prohibition with public comment period
• Framework establishes presumption against affiliate-based reward structures and indirect payments
• Merchant discount programs and whitelabel profit-sharing permitted without holder compensation
• Yield prohibition establishes foundation for broader CLARITY Act discussions and market standards
• Regulatory reach extends to international issuers serving American customers; implementation targeted for early 2027

The Office of the Comptroller of the Currency has published a comprehensive regulatory proposal designed to implement the GENIUS Act while eliminating yield payments on stablecoin holdings. The framework establishes rigorous operational standards and invites stakeholder feedback over a 60-day period. This initiative marks a significant transformation in how payment stablecoins will function under federal banking supervision.

Comprehensive Standards Define GENIUS Act Implementation

The regulatory agency has laid out extensive requirements governing how authorized payment [[LINK_START_0]]stablecoin[[LINK_END_0]] issuers must conduct operations under federal authority. The proposal explicitly forbids issuers from distributing any form of yield related to stablecoin ownership or transactions. The framework also establishes a regulatory assumption that indirect compensation mechanisms may contravene GENIUS provisions.

According to the OCC, issuers bear the burden of proving compliance when affiliated organizations or connected parties provide incentives linked to stablecoin holdings. The regulator cautioned that these arrangements could represent strategies to circumvent legislative restrictions. Issuers must supply written evidence to rebut these regulatory presumptions.

The proposal includes two specific exceptions that address merchant and partnership arrangements. Independent merchants retain the ability to provide discounts for stablecoin payments, while issuers can distribute earnings to unaffiliated partners through whitelabel arrangements. These exceptions explicitly prohibit creating yield opportunities for stablecoin holders.

Regulatory Framework Shapes CLARITY Act Negotiations

The [[LINK_START_1]]OCC[[LINK_END_1]]’s proposed rules directly influence the evolving conversation around the Digital Asset Market Clarity Act of 2025. By establishing a zero-yield standard for GENIUS-compliant issuers, the banking authority creates definitive regulatory boundaries. This approach may fundamentally alter conversations surrounding incentive-based stablecoin offerings.

The limitations directly challenge positions from companies seeking to provide regulated interest on stablecoin deposits. These organizations have advocated for lawmakers to maintain optional compensation mechanisms within federal frameworks. The OCC’s approach effectively excludes these business models from the GENIUS regulatory category.

This proposal creates a clear division between yield-generating products and federally overseen payment stablecoins. The separation forces interest-bearing programs toward different regulatory channels. The framework indicates that compliant payment stablecoins must function without financial rewards connected to customer holdings.

Expanded Supervision Scope and Operating Requirements

The OCC‘s oversight will encompass national bank affiliates, federal qualified issuers, state qualified issuers, and specific international issuers. This expansion incorporates foreign entities within the regulatory framework when serving American customers. The proposal reinforces federal authority over international stablecoin operations.

The draft establishes standards for reserve composition, redemption processes, liquidity management, audit requirements, and custody arrangements. Application procedures and capital buffers are included to promote system stability. Current capital adequacy standards and enforcement mechanisms will be modified to reflect GENIUS requirements.

The [[LINK_START_2]]OCC[[LINK_END_2]] anticipates the framework becoming operational by January 2027 at the latest. Earlier implementation remains possible should final regulations be completed ahead of the statutory timeline. The agency indicated that Bank Secrecy Act compliance and sanctions protocols will be addressed through separate rulemaking.

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