A month ago, writing about the Federal Reserve's proposals under the GENIUS Act, we said the two variables that decide competition were left open as questions, and named the first: how far the ban on paying holders reaches. If an affiliate may pay a holder for holding, the instrument competes with a deposit on price. If it may not, it is a payment rail.
On 23 October the Office of the Comptroller of the Currency published its final rule, effective 18 January 2027. It answers that question for every issuer it supervises, and the answer is that the rule will not say.
The boundary is in supervision.
1 What The OCC Proposed In March
The statute is short. A permitted issuer may not pay "interest or yield to a payment stablecoin holder solely in connection with the holding, use, or retention of such payment stablecoin." The difficulty is the word solely, and the obvious route around it: the issuer does not pay the holder, an affiliate or a partner does.
The OCC's proposal of 2 March closed that route with a presumption. Where an issuer had an arrangement to pay interest or yield to an affiliate or related third party, and that party had an arrangement to pay the issuer's holders for holding, the payment was presumed prohibited. The issuer could rebut it in writing.
The Federal Reserve built its own proposal on that design. Its proposed section 247.10(c)(4)(i) adopts the presumption and says why in plain terms: the Board is "proposing to follow the approach proposed by the OCC."
2 What The OCC Took Out
The final rule removes it. "After reviewing the comments, the OCC has determined to eliminate the rebuttable presumption from the final rule." The reason given is the stage of the market: "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." And a reason of design: the presumption "could have been both overinclusive and underinclusive," catching permissible arrangements while implying that anything outside it was fine.
It goes further than removing the test. Asked by commenters to say which rewards count, the OCC "has decided not to define the terms 'interest' or 'yield,'" and is not publishing a list of permitted or prohibited arrangements. In place of all of it: "the OCC will initially monitor arrangements with permitted payment stablecoin issuers and foreign payment stablecoin issuers as part of its review of issuers' applications and ongoing supervision of such entities. Where it identifies transactions that violate or evade the yield prohibition, the OCC will take action and provide the public with additional guidance regarding such actions and interpretations, as appropriate."
The anti evasion power is kept. "Although the OCC is eliminating the rebuttable presumption from the final rule, the OCC emphasizes that the OCC retains its authority to address evasion." Nothing has been permitted. What has changed is when the line is drawn. Not in the rule, before anyone builds. In supervision, after someone has.
3 Framework · Two Regulators, One Clause
| OCC | Federal Reserve | |
|---|---|---|
| Status | Final rule, published 23 October, effective 18 January 2027 | Proposal, published 29 September, comments close 30 November |
| Affiliate and third party payments | No presumption. Arrangements monitored in supervision | Presumed prohibited, rebuttable in writing |
| Definition of interest or yield | Declined | Asks whether the terms should be clarified |
| How the boundary gets drawn | Enforcement action, then published guidance | A written test before the arrangement, with a rebuttal route |
| The deposit question | Summarised in the comment record, answered with monitoring | Put directly to commenters: what impact would either prohibition have on bank deposits |
The Fed copied a clause from the OCC, and the OCC deleted it while the Fed's comment period was still open. Unless the Board follows, a national bank's issuing subsidiary and a state member bank's will operate under different tests for the same statutory sentence.
4 Where The Line Moved
The comment record the OCC summarises shows what was at stake. Commenters favouring a broad ban argued that rewards programs "could act as an evasion of the prohibition," would "blur the line between payment and investment instruments," and that excluding them "could negatively impact competition between highly regulated banks and less regulated entities." Some cited estimates that deposits could fall by trillions of dollars. Commenters on the other side argued that transaction based rewards, and rewards funded independently by third parties, are not interest or yield at all.
The OCC chose neither side's text. It chose discretion. That has a familiar shape. In July we argued that the binding constraint in this area is the allocation of enforcement rather than the definitions. In August we described an SEC safe harbour where the issuer certifies and the test is applied afterwards. This is the third instance in three months of the same design: the rule states the prohibition, declines to specify its edge, and leaves the edge to be found by whoever acts first and whoever enforces after.
For anyone designing a rewards program around an OCC supervised issuer's stablecoin, the cost has moved. Under the proposal it was the expense of a written rebuttal before launch. Under the final rule it is the risk of an enforcement action after launch, priced without a definition to price against.
5 The Other Side
Five arguments cut against this note.
The prohibition is unchanged. The statute bans paying holders for holding, the anti evasion authority is intact, and removing a presumption is not a permission. A program that is yield in substance remains prohibited; what it loses is the certainty of knowing in advance.
The OCC's reasoning is sound on its own terms. A presumption that is both too wide and too narrow is a poor tool, and supervising a new market through applications and examinations before writing bright lines is how banking regulators usually proceed. Guidance that follows real cases may be better guidance.
The scope is limited. This rule binds entities under the OCC's jurisdiction. The Fed's proposal is open, and the Board may yet finalize its presumption, follow the OCC, or land somewhere between.
The deposit estimates are advocacy. They appear in the OCC's summary of what commenters said, not as findings of the OCC, and we do not adopt them.
And nothing has been tested. The rule takes effect in January. Until the first issuer is supervised under it, discretion is a description, not a record.
6 What Would Settle It
- Whether the Fed's final rule keeps the presumption in section 247.10(c)(4)(i), drops it, or narrows it. Comments close on 30 November.
- The first OCC action or interpretation on a rewards program. The rule says guidance will follow enforcement; the first published guidance will be the first definition.
- Whether balance based rewards appear on OCC supervised issuers' stablecoins after 18 January, and through which affiliates or partners.
- Whether the FDIC, whose own GENIUS Act rules are still in progress, sides with the written test or with discretion.
- Whether Congress returns to the yield question in market structure legislation, which the Senate failed to advance in September.
If the Fed follows the OCC, the edge of the yield ban will be drawn case by case across the whole bank track, and the first enforcement action will matter more than any comment letter. If the Fed keeps its presumption, the same statutory sentence will carry two tests depending on which regulator charters the parent.
7 Sources
Quotations are taken from the primary documents. Retrieval 26 October 2026.
- OCC, Implementing the GENIUS Act for the issuance of stablecoins by entities subject to the jurisdiction of the OCC, final rule, 91 Fed. Reg. 67000, 23 October 2026, effective 18 January 2027. The 2 March proposal and its presumption, the summary of comments, the elimination of the presumption and its stated reasons, the decision not to define interest or yield, the commitment to monitor and act through supervision, and the retained anti evasion authority.
- Federal Reserve Board, Implementing the Federal Reserve Board's responsibilities under the GENIUS Act, proposed rule, published 29 September 2026, comments due 30 November 2026. The presumption in proposed section 247.10(c)(4)(i), the statement that it follows the OCC's proposed approach, and the consultation questions on broadening the prohibition and its effect on bank deposits.
- OX85, Who enforces the rules?, July 2026, Who decides it is over?, August 2026, and What does it cost a bank to issue?, September 2026.
On sourcing, and on what we did not use. Estimates of deposit outflows appear only as the OCC's summary of commenters' views and are not used as findings. We did not read the FDIC's pending GENIUS Act proposals beyond confirming their status in the Federal Register. Our September paper said the Federal Register date of the Fed's proposal was unconfirmed; it was published on 29 September, with comments due on 30 November. The OCC's changes to capital and operational backstop requirements are not covered here.
This note is published for informational purposes and does not constitute investment, legal or tax advice. It describes a final rule that takes effect in January 2027 and a pending proposal that may change before adoption. It is not a recommendation regarding any security or digital asset. Figures and quoted language are as of the dates stated.