The Office of the Comptroller of the Currency published its proposed rulemaking to regulate stablecoins under the GENIUS Act, sparking questions about whether it was banning yield payouts from crypto companies.

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Yield fight

The narrative

The Office of the Comptroller of the Currency (OCC), a federal banking regulator, published a notice of proposed rulemaking pursuant to the GENIUS Act explaining how it might oversee stablecoins. Most of it appears straightforward, but the portion addressing yield seems ambiguous, and possibly even controversial.

Why it matters

The OCC published its first take at rulemaking under the GENIUS Act, the first step toward turning the 2025 law into actual, applicable rules for crypto companies to abide by. Controversially, it seems to propose setting up new restrictions around how stablecoin issuers and their partners can offer yield payments to end users.

Breaking it down

Just to get this out of the way: Most of this 376-page proposal seems fairly straightforward. Provisions address custody controls, capital requirements and the other prosaic regulatory details that one would expect from a proposal seeking to govern the U.S. stablecoin sector. This newsletter may touch on those details in a future edition.

The most controversial part appears to be the sections addressing stablecoin yield and how issuers and affiliates can handle those. According to multiple people tracking this process, speaking on condition of anonymity to discuss an active rulemaking proposal candidly, these sections also seem to be ambiguous. One individual said the OCC seemed to be claiming the authority to ban third parties from offering yield from holding stablecoins, exceeding its authority in the process. But two others said the proposal fit the language of the law defined in GENIUS, and that they had no concerns about yield being banned unilaterally.

What the provisions might do is place restrictions on how stablecoin issuers' partner companies can pay out interest on stablecoin deposits, the yield we've been referring to here.

"[The] proposed [section] provides that permitted payment stablecoin issuers must not pay the holder of any payment stablecoin any form of interest or yield (whether in cash, tokens, or other consideration) solely in connection with holding, use, or retention of such payment stablecoin," the proposal said. "The OCC understands that issuers could attempt to make prohibited payments of interest or yield to payment stablecoins holders through arrangements with third parties."

The section went on to list some of these third-party relationships but said "it would not be possible to identify in detail all, or even most, of the potential arrangements."

However, the proposal said that the OCC would presume these payments are solely for yield purposes if there was a contract to that effect and third parties would be defined as entities paying yield as a service.

Companies would be able to push back and "rebut the presumption" if they have evidence their contractual relationship does not meet those terms, the proposal said.

Companies like Coinbase and Circle might have to tweak the terms of their relationship to abide by the terms of the proposal, as might companies like PayPal and Paxos, the issuer of PayPal's PYUSD stablecoin, two people said about this section.

Matthew Sigal, head of digital assets research at VanEck, also shared this view, saying on X (formerly Twitter) that companies like Coinbase would have to make their agreements look more like loyalty programs than interest payments.

One confusing part about the proposal, one individual said, is in the definition of an "affiliate." A company could be an issuer or an affiliate, where affiliates may not be able to issue yield solely for holding deposits, but the proposal appears to create a third category based on ownership stakes. If an issuer has a 25% or greater stake in a third-party, they would not be able to offer payments on yield, which might open the door for third-parties that don't have such ownership stake concerns.

Similarly, the wording addressing "white-label relationships" may bar yield payments, but it would depend on the terms of the contract between the issuer and the company associated with the stablecoin, the person said. This is the sort of setup PayPal and Paxos have.

To further add to the confusion, stablecoin yield is also one of the issues holding up the advancement of the market structure legislation that the crypto industry continues to hope for. Two people said the OCC proposal might mean that Congress does not need to address yield in the market structure bill at all, but others said there is zero chance Congress will skip over this portion of the bill.

Yield isn't the only issue holding up the bill — ethics provisions concerning President Donald Trump and his family's crypto activities, as well as anti-money laundering and know-your-customer rules, still need to be worked out — but if the market structure bill becomes law, it will again reshape how stablecoins can operate in the U.S.

As a result, it is likely that this part of the OCC proposal will not be implemented as-is.

If the market structure bill does become law before the OCC can finalize its rules, the regulator will have to issue an interim proposal to remain compliant with the new law. Otherwise, there will be a whole separate rulemaking process later down the line.

On the market structure bill itself, individuals said that there is some updated draft language circulating among lawmakers but there is no deal between the banking industry and the crypto industry yet.

This week

This week

• There are no government hearings or meetings scheduled as of press time addressing crypto-related issues.

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See ya’ll next week!