The Fed writes the stablecoin reward presumption into rule

The Federal Reserve put two stablecoin proposals out for comment on Thursday, its share of the multi-agency build-out that last year's GENIUS Act requires, and with them started a sixty-day clock on the question the industry has argued over since the law passed: how much value a platform may hand back to the people holding the token.

The Guiding and Establishing National Innovation for U.S. Stablecoins Act directed the banking regulators and the Treasury Department to have their rules in place by July 2026, and the Fed is past that line, as the other agencies are, with significant progress in recent months rather than anything finished. What arrived Thursday was draft text that needs public input before the Fed revises and publishes a final version, a sequence that usually runs several months and sometimes much longer.

The first proposal carries the substance, setting capital and reserve requirements meant to keep a stablecoin fully represented by the most liquid assets and its issuer on solid footing in stress, and defining which stablecoin activities the Fed will accept at banks it supervises; the second is procedural, requiring a regulated bank that wants to issue its own token to supply a business plan, financial information, and the relevant policies and procedures, with the rewards question sitting in the first.

Read the two together and the shape of the perimeter shows: that application list is the paperwork of an institution that already holds a charter and is adding a product line, which suggests the Fed is writing for banks that want to issue rather than for issuers that want to become banks. The coverage does not say what would move an applicant from one category to the other.

Inside the first proposal is a clause doing more work than the reserve math: "Under the proposal, certain types of arrangements involving third parties would be presumed to be prohibited payments of interest or yield," the Fed wrote, adding that its approach is consistent with the OCC's. Third-party arrangements is the operative phrase. The law bans an issuer from paying interest or yield on what it issues; the Fed's presumption reaches past the issuer's own books to the arrangements around it, which is where a platform's reward program would sit on the draft's reading.

The draft stops short of a blanket prohibition; according to the reporting, the agencies appear to be allowing a very narrow route for crypto platforms to offer stablecoin rewards structured like credit-card incentive programs, closer to cash-back than to a yield-bearing account. The distance between a rebate and a yield is where the commercial stakes live, and the comment record is where it gets argued.

Alignment across the agencies is not a formality: a federal framework is only as permissive as its narrowest reading, so a Fed rule that tracked the OCC's in one direction while drifting in another would leave the answer to whichever supervisor held the charter. The Fed says its approach is consistent with the OCC's down to the third-party presumption, which, if it survives final text, gives the narrow rewards reading two agencies' footing rather than one.

Congress had this fight and lost it. How far a company like Coinbase could go in rewarding stablecoin holders was among the sticking points in the debate over the Digital Asset Market Clarity Act, and the attempt to revise the rewards rule through that bill did not succeed, which leaves the primary law governing stablecoin rewards where it was when GENIUS passed. The bill this publication has reported dead at 49-50 took the legislative route with it, leaving a docket: a presumption, a narrow carve, and sixty days to contest where the boundary runs.

Where a failed floor vote leaves a question exactly where it stood, a proposed rule creates a record, a revision, and eventually a text that binds the banks the Fed supervises, and the second proposal is where the Fed writes the conditions under which those banks may issue a token.

The part the coverage does not supply is the part that decides how strict the reserve floor is: nothing in the reporting names eligible asset classes or capital ratios for the first proposal, only that backing must sit in the most liquid assets and that the issuer must be able to stand up under stress.

Fed Governor Michael Barr, who ran the Fed's supervision program before the Trump administration, framed the standard in a statement: "Stablecoins will only be stable if they can be reliably and promptly redeemed at par in a range of conditions." That is the test the capital and reserve requirements exist to meet, and it is the half of the package least likely to draw a serious fight; full backing in liquid assets is a solvency question, and solvency is not something an issuer argues its way out of in a comment letter.

The presumption is the harder half, and the more consequential one. Reserve standards govern how a token is backed; the presumption governs what the token is for. A stablecoin held for a rebate behaves like a payments product, and one held for yield behaves like a deposit, which is the business bank regulators charter institutions to conduct. By adopting the OCC's construction, the Fed has moved the narrow rewards path from one agency's judgment onto two, and unwinding that later takes a court, a fresh rulemaking, or a Congress that has already tried once.

Watch whether the final Fed text keeps the presumption intact or widens the card-style carve, and whether the Treasury's rules under the act follow the same construction. The July deadline is already behind the agencies, final text is months from the close of comment, and no part of either draft binds until it lands.