OCC's final rule to start fresh in weighing stablecoin rewards against GENIUS Act ban

U.S. crypto exchanges that have long been giving people rewards for usings stablecoins will have to get the agency to sign off on those existing programs, according to the U.S. Office of the Comptroller of the Currency, the first federal banking regulator to issue a final rule under the Guiding and Establishing National Innovation for U.S. Stablecoins ($GENIUS) Act.

The OCC, which oversees U.S. national banks and trusts that will play a central role in the issuance of stablecoins under the law, issued a final rule on Wednesday to establish the regulations under which the firms that issue the dollar-based tokens will operate — including in their third-party relationships with the exchanges on which their stablecoins change hands.

The agency — an independent bureau of the Treasury Department — has declined to offer examples or illustrations of what type of rewards operations may run afoul of the $GENIUS Act, which declared that payments to customers made "solely in connection with the holding, use, or retention of such payment stablecoin" won't be allowed. The industry, which won't get any safe harbors for existing programs, will just have to test the agency's case-by-case oversight to get a better sense of the rule, which is set to go live on January 18.

The regulator said it "will apply the language of the statute to the facts and circumstances of any particular arrangement." However, the agency did suggest that the word "solely" in the prohibition is carrying a lot of weight, and that a reward that "might be made, at least in part, for other reasons" would fall outside the ban in the $GENIUS Act.

Payment stablecoins hew to the value of the U.S. dollar and are designed — as suggested by the name — to maintain a steady value in a crypto industry in which other assets are known to be famously volatile. The sector is currently led by Tether's USDT and Circle's USDC, but a number of entrants have begun crowding into the space.

The overall effective date of the $GENIUS Act was supposed to arrive in January, but it's unlikely all of the required rules will be in place before then, based on the scheduled periods in which the other agencies are still taking public comments.

OCC officials told reporters that the new rule will give "opportunities for a range of institutions," including community banks, to get involved with stablecoins.

The agency said it changed its reserve requirements between the proposed rule and this final one, adopting "a principles-based approach with respect to reserve asset diversification and concentration requirements," which it said is backed by requirements to "ensure a minimum amount of daily liquidity and avoid excessive concentration with respect to a single counterparty."