The US Office of the Comptroller of the Currency (OCC) finalized its GENIUS Act implementation rule on October 21, preserving the ban on stablecoin issuers paying yield simply for holding, using or retaining payment stablecoins. But it dropped a proposed provision that would have presumed certain reward arrangements involving affiliates and third parties unlawful.
The change has divided the crypto and banking industries. Crypto groups welcomed the narrower restriction, while banks warned it could allow stablecoin platforms to keep offering rewards that compete with bank deposits. The Independent Community Bankers of America (ICBA) estimates that widespread stablecoin adoption could eventually reduce community-bank lending by at least $850 billion.
The key distinction: the OCC removed a presumption of illegality, not the ban itself. Reward programs will still face case-by-case scrutiny.
What the Final Rule Changes
The GENIUS Act is being implemented across several US agencies, with the OCC, Federal Reserve, Federal Deposit Insurance Corporation and Treasury handling different parts of the regulatory framework.
The OCC’s final rule covers qualifying payment-stablecoin issuers under its jurisdiction, foreign issuers and certain custody activities conducted by OCC-regulated institutions. The rule takes effect on January 18, 2027.
Issuers must maintain reserves of at least 1:1 against outstanding payment stablecoins using legally permitted assets and establish redemption policies that meet applicable deadlines.
Two other provisions matter to the industry.
First, nonbank institutions can apply to become federally qualified stablecoin issuers, although the OCC said it would announce separately when applications open.
Second, foreign issuers seeking access to the US market must meet requirements involving the regulatory regime in their home jurisdiction and register with the OCC. This could have significant implications for overseas issuers such as Tether, whose USDT accounts for roughly 60% of stablecoin market capitalization, according to DefiLlama.
The OCC will issue separate rules covering areas such as anti-money laundering, sanctions and Bank Secrecy Act compliance.
Stablecoin Rewards Survive—For Now
The law prohibits issuers from paying yield solely because a customer holds, uses or retains a payment stablecoin. The OCC’s original proposal would also have created a rebuttable presumption that certain arrangements involving affiliates or third parties violated that restriction.
The final rule removes that presumption. Instead, regulators will assess arrangements individually and can still pursue practices designed to circumvent the ban.
That distinction matters for companies whose business models rely on distributing stablecoin rewards through exchanges and other partners.
Coinbase, for example, reported $1.35 billion in stablecoin revenue in 2025, much of it associated with its USDC arrangement with issuer Circle. Rewards have also been an important part of its strategy for attracting and retaining users.
Circle’s own financial disclosures illustrate the economics. In the first half of 2026, it reported approximately $1.4 billion in revenue, with about $819 million going to distribution partners and transaction costs. The figures highlight how important distribution arrangements are to the USDC business model.
PayPal’s PYUSD offers another test case. Paxos issues the stablecoin, while PayPal offers rewards to eligible users. Whether such arrangements comply with the final rule will depend on their specific structure and the regulator’s assessment.
The Blockchain Association welcomed the OCC’s decision, arguing that the final rule better reflects the law’s text.
But the change is not a blanket approval of existing rewards programs. Regulators will examine the substance of each arrangement, including whether payments effectively reward users solely for holding stablecoins and whether third-party structures are being used to evade the restriction.
Banks Warn of an $850 Billion Lending Shortfall
Banking groups argue that the removal of the presumption weakens a safeguard against stablecoin platforms indirectly paying yield through exchanges, affiliates and other distribution partners.
The American Bankers Association and Bank Policy Institute warned that the change creates uncertainty and could allow crypto firms to continue competing for deposits without clear limits.
ICBA estimates that widespread adoption of payment stablecoins could eventually reduce community-bank lending by at least $850 billion. This is a projected scenario, not a measure of lending losses that have already occurred.
A study published by the White House Council of Economic Advisers in April reached a much smaller baseline estimate. It found that banning stablecoin yield would increase bank lending by approximately $2.1 billion, or 0.02% of total lending. Under a set of more extreme assumptions, the estimated increase rose to around $531 billion, or 4.4%.
The figures rely on different models and assumptions, so they are not directly interchangeable. The underlying debate concerns how large the stablecoin market could become, how much money might leave bank deposits, and whether banks could replace that funding.
Stablecoin growth does not automatically translate into an equivalent reduction in lending. The outcome depends on how reserves are invested, where funds originate and how banks respond to changes in their funding.
Banks Have Their Own On-Chain Alternative
The GENIUS Act’s definition of payment stablecoins excludes bank deposits, including certain deposits recorded on distributed ledgers. That leaves room for banks to develop tokenized deposits that can pay interest under existing banking rules.
Unlike stablecoins issued by nonbank companies, tokenized deposits remain bank liabilities and are subject to banking regulation.
This creates a potential competitive advantage. While stablecoin issuers face restrictions on paying yield, banks can continue offering interest-bearing deposits, including through eligible tokenized products.
There is a historical parallel. In the 1970s, US restrictions on deposit interest rates helped money-market funds attract savers seeking returns. Legislation in 1980 provided for the gradual removal of those restrictions, and banks introduced money-market deposit accounts to compete.
Tokenized deposits could offer banks another way to compete for funds as blockchain-based payments expand. But regulatory permission alone will not guarantee adoption: users will also weigh returns, convenience, liquidity and the range of supported applications.
The Next Regulatory Test
The OCC’s final rule leaves stablecoin rewards in a more uncertain position than either side might prefer. The statutory ban remains, but the removal of the presumption means some third-party arrangements may survive regulatory review.
The next phase will depend on how the OCC interprets those arrangements, what enforcement actions it brings and how stablecoin platforms adapt their business models. Meanwhile, banks can pursue tokenized deposits and continue arguing for tighter restrictions on indirect stablecoin rewards.
Ultimately, the competition is about more than interest payments. It is about where consumers and businesses choose to hold digital dollars—and whether stablecoin platforms or regulated banks can offer the most useful products within the rules.