The OCC Just Redefined the Stablecoin Industry. Here’s What Actually Happened — and What It Means.
On February 25, 2026, the Office of the Comptroller of the Currency released a Notice of Proposed Rulemaking to implement the GENIUS Act — the federal stablecoin law signed in July 2025. The 376-page proposal establishes a new Part 15 of Title 12 of the Code of Federal Regulations, covering everything from reserve requirements and redemption standards to licensing pathways and capital floors for payment stablecoin issuers.
It is, in a word, comprehensive. And at its center sits a provision that may reshape the competitive landscape between banks and the digital asset industry: an aggressive prohibition on stablecoin yield, backed by a rebuttable presumption designed to close the workarounds before they open.
This article examines what the OCC actually proposed, what it means for the ongoing legislative fight over the CLARITY Act, why the banking industry’s $6 trillion deposit-flight warning deserves serious scrutiny, and what the historical precedent of money market funds tells us about what comes next.
What the OCC Actually Proposed on Yield
Under proposed § 15.10(c)(4), permitted payment stablecoin issuers would be prohibited from paying any form of interest or yield — whether in cash, tokens, or other consideration — solely in connection with the holding, use, or retention of a payment stablecoin. The statute itself, section 4(a)(11) of the GENIUS Act, already contains this prohibition. What the OCC’s proposal adds is enforcement architecture.
The key mechanism is a rebuttable presumption. If two conditions are met — the issuer has an arrangement with an affiliate or related third party to pay yield, and that affiliate or third party has a separate arrangement to pay yield to stablecoin holders — the OCC will presume the issuer is violating the GENIUS Act’s prohibition. The issuer may submit written materials to rebut the presumption, but the burden falls entirely on them to demonstrate that the arrangement is neither prohibited nor an evasion attempt.
This mechanism matters because it targets the crypto industry’s primary compromise strategy. Companies like Coinbase had argued that the GENIUS Act’s yield ban applied only to issuers — not to third-party platforms that independently offer rewards. The OCC’s proposed rule directly addresses that theory by capturing affiliate and related-third-party arrangements within the presumption.
As CoinDesk reported on February 26, the industry has been operating on an assumption that the GENIUS Act’s prohibition on issuer-paid yield would not extend to third parties offering their own rewards programs on those issuers’ tokens. The OCC’s proposed language upends that assumption — though industry lawyers are still studying whether the wording leaves room for certain structures to survive.
The proposal does include two narrowly drawn carve-outs. First, it does not prevent a merchant from independently offering a discount for payment in stablecoins — that’s commercial activity, not yield. Second, it does not bar an issuer from sharing profits with a non-affiliate partner in a white-label arrangement. Both exceptions are drafted to prevent them from becoming disguised yield channels back to holders.
Key Provisions at a Glance
Reserve requirements: Issuers must maintain segregated high-quality liquid assets — cash, Fed balances, demand deposits, short-dated Treasuries, qualifying repos, and government money market funds — equal to or exceeding the total par value of outstanding stablecoins at all times.
Redemption: At par within two business days, with a non-discretionary extension to seven calendar days only when redemptions exceed 10% of outstanding issuance in a rolling 24-hour period.
Capital floor: $5 million minimum for de novo stablecoin issuers.
Examination: Annual full-scope exams, quarterly Call Report-style filings, monthly reserve attestations with CEO/CFO certifications.
Foreign issuers: Must qualify as “permitted foreign payment stablecoin issuers” meeting equivalent standards with OCC approval.
BSA/AML: Addressed in a separate forthcoming rulemaking coordinated with the Treasury Department.
Timeline: 60-day comment period from Federal Register publication. GENIUS Act effective date is the earlier of January 18, 2027, or 120 days after final rules are issued.
Why the Yield Fight Matters: The CLARITY Act Connection
The stablecoin yield debate has been the single biggest obstacle to advancing the CLARITY Act — the comprehensive digital asset market structure legislation that passed the House with a bipartisan vote of 294–134 in July 2025 and now awaits Senate action.
The path through the Senate requires clearing two committees. The Senate Agriculture Committee advanced its companion bill, the Digital Commodity Intermediaries Act, by a 12–11 party-line vote on January 29, 2026. But the Senate Banking Committee — where the yield fight is centered — has not completed its markup. A January 14 markup was postponed after Coinbase CEO Brian Armstrong publicly withdrew the exchange’s support, citing provisions he said would effectively eliminate stablecoin rewards.
Since then, the White House has convened at least three meetings between banking industry and crypto representatives, led by Presidential Crypto Council Executive Director Patrick Witt, attempting to broker a compromise. The third meeting, held February 19, ran well past its scheduled two-hour window, with officials collecting attendees’ phones and pressing for common ground. A deal still has not emerged as of this writing, with the White House’s March 1 deadline now imminent.
The banking industry’s formal position, circulated in a document titled “Yield and Interest Prohibition Principles,” has been firm: any yield or reward tied to stablecoins should be prohibited. The crypto industry’s counter-position, articulated by the Digital Chamber of Commerce, would give up yield on static stablecoin holdings but preserve rewards tied to liquidity provision, DeFi participation, and ecosystem activity.
Here is where the OCC’s timing becomes strategically significant. By establishing a no-yield baseline through rulemaking — addressing the question that Congress has been unable to resolve through legislation — the OCC may have created a path for the CLARITY Act to proceed without its own yield provision. As one crypto industry insider told CoinDesk, the OCC’s action should undermine the banks’ lobbying on this point in Congress, because the regulator has already taken it up.
That’s an elegant regulatory maneuver, if it holds. The banking industry gets the yield prohibition it demanded. The crypto industry gets to fight the specifics through the administrative comment process and potential future litigation rather than in a binary congressional vote. And the CLARITY Act can potentially advance on its remaining merits — market structure, SEC/CFTC jurisdictional clarity, and digital commodity definitions — without being held hostage by the stablecoin yield impasse.
The $6 Trillion Question: Are Banks Right About Deposit Flight?
The banking industry’s case rests on a headline-grabbing figure. In January 2026, Bank of America CEO Brian Moynihan warned during a quarterly earnings call that up to $6 trillion in deposits — roughly 30–35% of all U.S. commercial bank deposits — could migrate into stablecoins if Congress permits interest-bearing digital tokens. He attributed the projection to Treasury Department studies and likened stablecoins to money market mutual funds: reserves parked in short-term Treasuries rather than recycled into bank lending.
Standard Chartered’s global head of digital assets research put a more specific figure on the near-term risk in January: $500 billion in deposits at risk across industrialized nations by the end of 2028. The American Bankers Association made stopping stablecoin yield its top 2026 policy priority, and more than 3,200 bankers signed a letter to the Senate demanding action.
These numbers deserve scrutiny — not dismissal, but rigorous examination. Because the banking industry has made this exact argument before.
The Money Market Fund Precedent: What History Actually Shows
When money market funds emerged in the early 1970s, banks made nearly identical claims. The first MMF — the Reserve Fund — was established in 1971 specifically to circumvent Regulation Q, which capped the interest banks could pay depositors at 5.25% while market rates climbed higher. As inflation pushed rates well above those caps, money poured into MMFs. Assets grew from $3.6 billion in 1975 to over $61 billion by 1980, with a compound annual growth rate of approximately 33% from 1974 to 1982.
Banks warned that unregulated yield products would drain deposits, destabilize the credit system, and undermine the banking charter. The ABA lobbied aggressively. Small-bank officials protested that they were at a particular disadvantage. Paul Volcker, then Fed Chairman, supported extending reserve requirements to MMFs to create a level playing field.
What actually happened was more complicated than either side predicted.
MMFs did pull significant balances from banks. The Federal Reserve’s own historical analysis confirms that at times in the 1970s, depository institutions lost substantial amounts of funds to MMFs. The competitive pressure ultimately led to the Depository Institutions Deregulation and Monetary Control Act of 1980, which began phasing out Reg Q, and the Garn-St Germain Act of 1982, which created money market deposit accounts at banks. The banks adapted, deposits continued to grow alongside MMFs, and the credit system survived.
A November 2025 Federal Reserve study — covering 30 years of data from 1995 to 2025 — found that a one-percentage-point increase in bank deposits was associated with only a 0.2-percentage-point decline in MMF assets. The substitution effect was meaningful but modest, and it largely disappeared under conditions of ample liquidity. Both sectors grew dramatically over the period: bank deposits roughly seven-fold, MMF assets roughly eleven-fold.
The banks’ apocalyptic predictions about money market funds didn’t materialize. Deposits didn’t collapse. The credit system didn’t break. But the banks were right about one thing: the competitive landscape changed permanently.
So does the MMF precedent support the banks or the crypto industry? The honest answer is that it supports both — and neither — depending on the time horizon.
In the short term, the banking industry’s deposit-flight fears are almost certainly overstated. Most American consumers are deeply inertial with their primary banking relationships. Direct deposit, auto-pay, mortgage servicing, and credit relationships create enormous switching costs that have nothing to do with yield. During 2023’s high-rate environment, high-yield savings accounts were widely available, and most deposits stayed put. The $6 trillion figure is a lobbying number, not a forecast.
But in the long term, the banks are right to be worried — just not for the reason they’re articulating. The threat isn’t yield. It’s unbundling.
The Real Structural Argument: It Was Never About Yield
The most important thing to understand about the stablecoin yield debate is that yield is a proxy for a much larger structural shift. Stablecoin yield is a customer acquisition mechanism. The endgame is platform dominance — the wallet becoming the primary financial interface where payments, savings, lending, and investment converge in a single experience layer that isn’t controlled by a bank.
This is precisely what happened after MMFs. Money market funds didn’t destroy banks. They kicked off a multi-decade process of financial unbundling that gave us Schwab, Vanguard, discount brokerages, fintech platforms, neobanks, and eventually stablecoins. Each wave stripped away one more layer of the traditional bank bundle. Each time, banks adapted and survived — but with a slightly smaller share of the customer’s total financial life.
An American Banker opinion piece published in January made a version of this point: the real competitive threat to banks is not stablecoin yield itself but the steady rise of wallet apps and fintech platforms that redefine where deposits sit by offering customers more useful and integrated financial products. Restricting yield addresses one acquisition mechanism while leaving the broader platform competition untouched.
The OCC appears to understand this dynamic, which is why the proposed rule may be more strategically significant than it initially appears. By drawing the line at “payment stablecoins don’t offer yield,” the agency isn’t just protecting bank deposits. It is defining the category. Payment stablecoins become infrastructure — cash-like, stored-value instruments under bank-style supervision. Yield-bearing instruments become something else, requiring a different regulatory wrapper and likely different supervisory oversight.
This creates a two-track regulatory architecture. Track one is OCC-supervised payment stablecoins: no yield, utility-focused, GENIUS-compliant, fully reserved, annually examined. Track two is everything else — yield products, DeFi instruments, reward mechanisms — which will face a patchwork of SEC, state, and potentially new federal oversight. Companies must choose which track they’re on. Some will try to operate on both, which creates significant compliance complexity.
What the OCC Got Right — and What Remains Unresolved
The OCC’s proposed framework has several strengths. The 1:1 reserve requirement with high-quality liquid assets, the par redemption mandate, the monthly attestations with CEO/CFO certifications, and the annual full-scope examinations create a prudential oversight regime that is rigorous but clear. Companies entering this space will know exactly what is expected of them. The $5 million capital floor for de novo issuers is low enough to allow new entrants but high enough to signal regulatory seriousness.
The foreign issuer pathway is particularly important. By requiring foreign payment stablecoin issuers to qualify as “permitted foreign payment stablecoin issuers” meeting equivalent standards with OCC approval, the proposal extends U.S. supervisory reach across borders and creates a meaningful barrier for offshore operators seeking U.S. market access.
But several critical questions remain open.
First, the BSA/AML and OFAC compliance framework — arguably the most operationally demanding part of any payment stablecoin program — has been deferred to a separate rulemaking coordinated with Treasury. Companies building compliance infrastructure will face a second major regulatory wave on a potentially overlapping timeline.
Second, the rebuttable presumption on yield creates a gray zone that will generate significant legal and advisory work. The OCC has acknowledged that arrangements not captured by the two-condition presumption may still violate the statute, and that it will assess those on a case-by-case basis. This means compliance is not a simple binary exercise. Companies will need sophisticated legal and regulatory analysis to determine whether their specific business structures survive scrutiny.
Third, Comptroller Jonathan Gould — notably, a former chief legal officer at Bitfury who has been broadly supportive of the crypto industry — advanced a proposal that the industry views as aggressive. The 60-day comment period will be contentious. The crypto industry has already signaled it will fight the proposed rulemaking, and the final rule may look materially different from the proposal. Companies should not treat the proposed rule as final.
The Contrarian View: Why the Banks’ Legislative Victory May Not Matter
Here is the thought that deserves the most careful attention: the banks may win this round — get the yield ban through OCC rulemaking, see the CLARITY Act advance, and celebrate — only to discover that it doesn’t change the outcome.
The deepest lesson of the money market fund precedent is not that banks were wrong about the competitive threat. They were right. MMFs did change the business. The lesson is that the regulatory victory didn’t prevent the structural shift. Banks got Reg Q repealed. They got to compete on rates. They got MMFs regulated under the Investment Company Act. And deposits still gradually unbundled over the following four decades.
A yield ban on payment stablecoins may similarly prove to be a pyrrhic victory. The wallet apps will still exist. The payment rails will still improve. The user experience gap between a bank and a fintech platform will still widen. The competitive pressure will migrate to dimensions the OCC cannot regulate: speed, programmability, integration, global reach, and user experience. And eventually, yield will re-emerge in some compliant wrapper that threads whatever regulatory needle gets drawn.
The question is not whether stablecoins will eat bank deposits. The question is whether anything can stop the ongoing unbundling of the bank account into its component services — payments, savings, credit, investment — delivered by purpose-built platforms that are increasingly better at each individual function.
What Comes Next
The 60-day comment period is now open. The GENIUS Act’s regulations must be finalized by July 18, 2026. The Act takes effect the earlier of January 2027 or 120 days after primary federal regulators issue final rules. The White House’s March 1 deadline on the CLARITY Act yield negotiations arrives in two days.
For companies building in the payment stablecoin space — or adjacent to it — the regulatory architecture is taking shape faster than many expected. The OCC has established itself as the primary gatekeeper, and the compliance requirements it has outlined are substantial. Reserve management, redemption infrastructure, capital adequacy, examination readiness, licensing applications, foreign issuer qualifications, and a forthcoming BSA/AML compliance build — all of these need to be addressed, and the timeline is measured in months, not years.
The companies that begin their compliance architecture now, during the comment period, will be positioned to operate when the rules take effect. Those that wait for final rules will be six to twelve months behind.
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This article is provided for informational and educational purposes only and does not constitute legal, regulatory, or financial advice. 7T World LLC is a risk and compliance advisory firm. For guidance specific to your business, contact us to schedule a consultation.
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