Federal bank regulators have confirmed that crypto exchanges can continue paying interest-like rewards on stablecoin balances, according to rules published by the Office of the Comptroller of the Currency (OCC) on Wednesday. The decision comes despite warnings from banking groups that such programs could draw large sums out of the banking system.
The guidance is part of the rollout of the GENIUS Act, which was signed into law last year to set rules for stablecoin issuers.
What the New Rules Allow
Under the OCC framework, stablecoin issuers such as Circle remain barred from paying interest directly to the people who hold their coins. Exchanges that trade and hold those stablecoins, including Coinbase and Robinhood, may pass earnings from the coins to customers in the form of interest-like rewards. Regulators said exchanges can do so on a case-by-case basis.
Banks had sought an outright ban on the practice.
Stablecoins are crypto tokens designed to hold a steady value, typically $1 per coin. They are backed by bank deposits and U.S. Treasuries, which earn interest — and that interest sits at the center of the dispute between banks and crypto firms. The industry wants to convert income from those reserves into yield for customers.
Why Banks Warn of Deposit Flight
Banking groups have pushed for tighter limits because crypto firms often offer higher yields than traditional savings accounts. Coinbase, for example, offers up to 3.5% on USDC balances, while the FDIC's latest figures put the average savings account yield at 0.38%.
If stablecoins and exchanges outcompete banks on yield, customers could shift savings into crypto — a trend known as deposit flight. The banking industry argues this would reduce banks' ability to lend and, in a worst-case scenario, cause some to fail. The same issue sparked intense debate when lawmakers drafted the CLARITY Act.
Banks and Consumer Groups Push Back
The American Bankers Association said the decision threatens the funds banks use to make loans that drive the U.S. economy. It argued the rule preserves the status quo for crypto platforms despite what it described as Congress's clear intent to protect local lending.
Consumer advocates have joined banks on the issue, an unusual alignment. They worry that customers will treat crypto rewards as equivalent to bank account interest, even though the crypto world has no equivalent of FDIC deposit insurance.
Phillip Basil of Better Markets said the OCC has handed stablecoin issuers a free pass to do the work of banks without the protections that keep the banking system safe.
