The crypto industry’s stablecoin operations, such as the arrangement between issuer Circle K and leading exchange Coinbase, could be under severe pressure in a new proposed set of stablecoin rules from the US Office of the Comptroller of the Currency.
Even as OCC chief Jonathan Gold testified in the US Senate on Thursday on issues including crypto oversight, industry people said they were trying to understand his agency’s 376-page proposal to regulate domestic issuers under the Guidance and Establishment National Innovation for US Stablecoins (GENIUS) Act that became law last year. Allowing stablecoin yields and rewards has not only been central to the Genius Act, but it has also been a main talking point in the more significant follow-up legislation known as the Digital Asset Market Clarity Act.
Close financial ties between issuers and the crypto platforms that handle their tokens “would make it highly likely that the issuer’s yield or interest would be paid to the holder through an intermediary or in an attempt to avoid the Genius Act’s prohibition on interest and yield payments,” the OCC proposal suggested.
Companies can rebut that presumption, the OCC said, “provided the issuer provides substantial evidence to the contrary.”
On the controversial point of rewards, the industry has operated under the assumption that the Genius Act’s ban on yields or rewards offered by stablecoin issuers does not extend to third parties who may offer their own rewards programs on those issuers’ tokens, such as Coinbase. But the OCC’s proposed language acknowledges that the law’s prohibition on unfair practices would be violated under certain third-party relationships, though the details are still being studied by crypto lobbyists and lawyers.
Industry insiders, requesting anonymity, acknowledged that this initial effort looks bad, and that they would be lining up to try to change it, but some suggest that there may be enough room in the agency’s wording to allow continued awards management.
Todd Phillips, a former attorney for the Federal Deposit Insurance Corp. and a business professor at Georgia who tracks digital asset policy, agreed that the proposed language doesn’t sound like a hard ‘no.’
“I think there is something wrong with what the OCC has proposed,” Phillips told CoinDesk on Thursday. He said the initial language seems uncertain as to whether this means “shutting down all permutations of stablecoin rewards.”
“The OCC has clearly gone beyond what is required by law,” Phillips said, adding that the extent of the ban “is open to debate.”
The agency did not immediately respond to CoinDesk’s questions.
The primary policy objective of the crypto industry in Washington is to advance Clarity Act regulations for overall US digital asset markets. In that legislative negotiations, this issue of stablecoin yields has become one of the major points of contention, with US bankers arguing that such yields threaten their fundamental reliance on customer deposits. During those negotiations, the crypto side has repeatedly argued that the Genius Act, as it stands, allows third-party crypto firms to offer rewards on stablecoin holdings and activities.
One of the insiders in the conversation told CoinDesk on Thursday that the OCC’s action should weaken banks’ lobbying, because what’s the point of reducing stablecoin yields in further legislation when the banking regulator has already taken it up as a proposed rule? Despite this, he also said that the OCC has overstepped, and the industry will likely fight against the proposed rulemaking even if the Clarity Act continues its way through Congress.
Meanwhile, the proposals put forward by Gold – Bitfury’s former chief legal officer, who has otherwise been a strong supporter of the crypto industry – cast some doubt on the industry’s confidence that Genius will protect the stablecoin rewards programs, which represent a significant business at Coinbase. The US crypto exchange has not yet made any public statement, and a company spokesperson declined to comment.
The proposed rulemaking from the OCC, which charters and oversees national banks and trusts in the US, is preliminary, opening up ideas to a public comment period that will later be followed by the final rulemaking process. The process typically requires months of discussion and review, with controversial rules.
If the OCC cuts off the ability of crypto platforms to extend stablecoin yields to customers, it could eliminate one point of the Clarity Act, though other matters still stand in the way of the bill. For example, Democratic lawmakers have insisted that the legislation address potential conflicts of interest by senior government officials like President Donald Trump who personally profit from the crypto industry.
At Thursday’s hearing before the Senate Banking Committee, stablecoin rewards often came up as a business that scares the banking industry. Regulators have suggested that they have not yet seen a flight of deposits from banks.
“We have to take these concerns, the concerns of community banks, particularly seriously,” said Senator Angela Alsobrooks, a Democrat who sought a compromise in the Clarity Act to ban the crypto industry from rewards on stablecoin holdings similar to a deposit account. So far, negotiations between political parties, banks, the crypto industry, and the White House have yet to reach an agreement that could be voted on in the Senate.
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