The Office of the Comptroller of the Currency today finalized a rule to enforce the Genius Act with a narrower prohibition on payment-of-interest than the agency originally proposed, although it expects to issue future rulemaking on the subject.
The Genius Act passed last year by Congress created a regulatory framework for payment stablecoins, including a prohibition that prevents issuers from offering yield or interest for stablecoins. The banking agencies have proposed regulations to implement the law, with the OCC the primary regulator of nonbank stablecoin issuers.
The American Bankers Association and others have noted that payment stablecoins are distributed through exchanges and intermediaries — not directly by issuers — which would allow those firms to skirt the payment-on-interest prohibition. Earlier this year, they urged OCC to strengthen its proposed language to enforce the prohibition. Instead, the agency did the opposite in its final rule, removing language that would have presumed certain transactions with affiliates and related third parties violated the prohibition.
“Because payment stablecoins are a nascent market, the OCC does not believe that it is appropriate to impose a rebuttable presumption with respect to the yield prohibition at this time,” the agency stated in the final rule.
Still, as the payment stablecoin market develops, “the OCC anticipates that it will gain sufficient experience with identifying prohibited transactions to allow it to propose a rulemaking clarifying the yield prohibition that does not have the disadvantages noted above,” it said.
In addition to the final rule, the OCC finalized a related rule to allow bank subsidiaries and other stablecoin issuers to request waivers from certain Genius Act requirements, and it finalized the reporting forms issuers must submit.
“We are providing a clear, practical framework for payment stablecoin innovation, with strong standards for reserve backing, redemption, and risk management,” Comptroller of the Currency Jonathan Gould said. “The OCC is drawing on its longstanding supervisory expertise to support responsible growth and innovation for this new industry.”
ABA response
While the final rule includes several positive steps, ABA disagrees with the OCC’s decision to move away from its original position on stablecoin yield, ABA President and CEO Rob Nichols said.
“The result is a final rule that will preserve the status quo for crypto platforms despite Congress’s clear intent to protect local lending,” he said.
By removing originally proposed safeguards, payment stablecoin issuers can provide economically equivalent yield while technically avoiding the statutory prohibition, Nichols said. The OCC also declined to adopt a broader presumption against arrangements designed to circumvent the ban.
“Those gaps risk undermining the distinction Congress drew between payment stablecoins and traditional bank deposits, threatening the funds banks use to make the loans that drive the U.S. economy,” he said. “And while we appreciate the OCC’s recognition that additional supervisory experience may inform future action in this area, attempting to address deposit flight and economic harm after it has occurred is the wrong approach. We will continue to work with regulators and policymakers to ensure the Genius Act is implemented in a manner that supports innovation while preserving financial stability, consumer protection and fair competition.”
