OCC issues first federal banking GENIUS Act final rule; stablecoin rewards need sign-off

Crypto exchanges that have long paid rewards on stablecoin balances will have to get the Office of the Comptroller of the Currency to sign off on those programs. The requirement comes from a final rule the agency issued Wednesday, which CoinDesk reported is the first final rule from a federal banking regulator under the Guiding and Establishing National Innovation for U.S. Stablecoins Act.

The rule takes effect January 18 and lays out the start-to-finish process for regulated firms and foreign companies to issue dollar-based stablecoins in the U.S., and for how firms keep custody of them. The OCC oversees national banks and trusts, which the law puts at the center of stablecoin issuance, including in their third-party relationships with the exchanges where the tokens change hands.

The GENIUS Act bars payments to customers made solely in connection with the holding, use, or retention of a payment stablecoin. The OCC has declined to offer examples or illustrations of what type of rewards operations may run afoul of that ban, and the industry gets no safe harbor for programs already running, CoinDesk reported. Firms with live rewards programs therefore face a case-by-case review with no published list to check themselves against.

The agency said it "will apply the language of the statute to the facts and circumstances of any particular arrangement." It also suggested the word "solely" carries much of the weight: a reward that "might be made, at least in part, for other reasons" would fall outside the prohibition.

The final rule is meant to operate alongside similar rules still being drafted at other agencies, and it leaves the Bank Secrecy Act components to other arms of the Treasury Department. That sequencing means the stablecoin regime's edges will be set piece by piece rather than in a single document.

Payment stablecoins track the value of the U.S. dollar and are designed to hold a steady value in a market where other crypto assets are known for volatility. The sector is currently led by Tether's USDT and Circle's USDC, with a number of entrants crowding in. January 18 gives issuers and the exchanges distributing their tokens a single date to work toward, and, for the rewards question, a regulator that has said it will answer case by case.