OCC finalizes GENIUS Act stablecoin rule, drops presumption on third-party yield

The U.S. Office of the Comptroller of the Currency (OCC) on Oct. 21 issued a final rule implementing the GENIUS Act, the federal stablecoin law, setting reserve, redemption and risk-management standards for bank subsidiaries and OCC-approved nonbank companies that issue dollar-pegged stablecoins. The Block reported that the OCC is the first U.S. regulator to finalize its rule under the act.

The OCC issued its proposal on Feb. 25 and took comments through May 1, while continuing to consider late comments until July 1. The final rule creates a new 12 CFR part 15 covering activities, reserve assets, redemption, audits and reports, custody, applications, supervision of foreign issuers and capital standards.

Yield workarounds to be judged case by case

The GENIUS Act bars issuers from paying holders any interest or yield solely in connection with the holding, use or retention of a payment stablecoin. The proposal went further with a rebuttable presumption: if an issuer had an arrangement to pay interest or yield to an affiliate or a "related third party," and that party paid yield to holders, the arrangement would be presumed to violate the ban unless the issuer showed in writing that it was neither prohibited nor an attempt at evasion. Related third parties included firms paying yield as a service on the issuer's behalf and white-label partners whose branded stablecoins the issuer mints.

The final rule drops the presumption. The OCC said that because payment stablecoins are a nascent market, imposing one would not be appropriate at this time, adding that it could have been both overinclusive and underinclusive. Instead, the agency will monitor arrangements through application reviews and ongoing supervision, take action against transactions that violate or evade the ban, and issue guidance as needed. It stressed that it retains its authority under the act to address evasion.

Banks and crypto firms have clashed over the stablecoin rewards that exchanges offer customers. According to The Block, banks have argued such rewards could draw deposits away and weaken community institutions. Responding to commenters who pointed to pending legislation, the OCC wrote: "Unless and until such legislation passes, the OCC must implement the GENIUS Act's yield prohibition, as enacted."

No automatic seven-day redemption extension; 24-hour reporting instead

Issuers must honor redemption requests within two business days. The proposal would have automatically extended that window to seven days during a surge in requests, but the final rule eliminates the extension after commenters warned it could trigger or worsen runs.

Instead, an issuer that receives redemption requests exceeding 10% of the outstanding issuance value of any stablecoin brand within 24 hours must notify the OCC within 24 hours. The issuer may then ask for more time, and the OCC can grant or deny the request at its discretion. The agency said it expects to use the authority sparingly and that extensions will be rare. The OCC also dropped a proposal requiring issuers with $25 billion or more outstanding to hold 0.5% of reserves, up to $500 million, as insured deposits, citing added operational risk.

"We are providing a clear, practical framework for payment stablecoin innovation, with strong standards for reserve backing, redemption, and risk management."

Jonathan V. Gould, Comptroller of the Currency

Anti-money laundering rules and applications come separately

The rule applies to subsidiaries of national banks, federal qualified nonbank issuers, certain state qualified issuers that fall under OCC authority, and foreign issuers. It also covers stablecoin custody by OCC-supervised banks. Bank Secrecy Act, anti-money laundering and Office of Foreign Assets Control sanctions requirements will be handled in a separate rule with the Treasury Department, which was proposed in the Federal Register on June 24.

The OCC will announce separately when it will start accepting applications and waiver requests from prospective issuers. Treasury Secretary Scott Bessent compared the law to the National Currency Act of 1863, saying in the release that "the GENIUS Act establishes a federal framework for payment stablecoins in the digital age."

Tether trades 0.3% above the dollar rate on Upbit

On Korean exchange Upbit's Korean won market, Tether (USDT) traded at 1,331 won and USD Coin (USDC) at 1,334 won as of 8:34 p.m. KST on Oct. 21. The won-dollar rate compiled by Coinyong at the same time was about 1,327 won, putting USDT about 0.3% and USDC about 0.5% higher. USDT's 24-hour trading value on Upbit was about 64.1 billion won. USDC traded at 1,332 won on Bithumb.