Summary

Situation Overview: The Office of the Comptroller of the Currency (OCC) issued a notice of proposed rulemaking (NPR) to implement the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act). The NPR addresses key topics, including the treatment of yield-bearing payment stablecoins, the framework for large state-approved nonbank issuers that seek to opt out of OCC oversight, and the regulatory framework for foreign stablecoin issuers.

What: On February 25, the OCC released an NPR and is seeking public comments on its proposed regulatory framework for permitted payment stablecoin issuers.

Who: Permitted payment stablecoin issuers, including, among others: insured banks, bank-affiliated subsidiaries, federal and state trust banks; state nonbanks, and foreign issuers that seek to issue payment stablecoins in the United States.

When: Comments on the NPR are due on May 1, 2026. The GENIUS Act’s effective date is the earlier of 18-months after its July 18, 2025, enactment or 120-days after the primary federal payment stablecoin regulators issue final implementing regulations.

In Depth

The highly anticipated NPR represents a significant step in the establishment of a federal regulatory framework for payment stablecoin issuance in the United States. The proposed rule spans a broad range of topics, including reserve asset and capital requirements, appropriate redemption policies and procedures, custody standards, among other areas. This post highlights select components of the proposed rule: (1) the limitations on yield-bearing features of payment stablecoins; (2) how state-chartered issuers may request to opt out of the OCC’s oversight; and (3) treatment of foreign stablecoin issuers seeking recognition in the United States.

For purposes of this post, we refer to issuer categories in descriptive terms rather than statutory language. The general categories we use include: insured bank subsidiary issuers, state-approved nonbank issuers (e.g., state nondepository or trust banks), and foreign issuers. This list of potential issuers under the proposed rule is not exhaustive but focuses on the entity types that are most relevant to the post’s subject matter.

Stablecoin Yield

The GENIUS Act prohibits any permitted payment stablecoin issuer from paying stablecoin holders “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.

In addressing this statutory language, the proposal is particularly focused on preventing issuers from effectuating yield through affiliates or related third parties, including under white-label relationships. The OCC acknowledges that “there likely will be a large and changing variety of arrangements with third parties in which issuers could achieve the payment of yield to payment stablecoin holders” and that “[i]t would not be possible to identify in detail all, or even most” such arrangements. To navigate this tension, the NPR proposes a rebuttable presumption framework, rather than relying solely on a general prohibition, explaining that “a rule with only a general prohibition on the payment of yield could create uncertainty within the payment stablecoin market.” Under the proposed standard, the OCC will assume an issuer has made an unlawful yield provision if the following two conditions are met: (1) the issuer has a contract or arrangement with an affiliate or “related third party” to pay interest or yield to that party; and (2) that party (or its affiliate) in turn has an arrangement to pay interest or yield to a stablecoin holder solely in connection with holding, using, or retaining the stablecoin. This presumption is rebuttable by providing the OCC with evidence that it is not attempting to evade the prohibition.

These proposed provisions apply to all issuer types and make clear that the OCC would be vigilant to stablecoin arrangements that may function as disguised yield. For payment stablecoin issuers, the significance of the proposed prohibition would impact how they may shape product design, partner relationships, and product economics.

State-Approved Nonbank Issuers

The GENIUS Act creates a default pathway to OCC supervision for state-approved nonbank stablecoin issuers with greater than $10 billion of value in stablecoins outstanding or issued. Once this threshold is exceeded, the state-approved nonbank issuer is automatically required to take steps to transition to the OCC’s federal regulatory framework within 360 days. A state-approved nonbank issuer has the option to submit a waiver to the OCC upon exceeding the $10 billion threshold that, if approved by the appropriate parties, would allow the issuer to remain state-regulated. The OCC notes that “[n]othing would prohibit a State qualified payment stablecoin issuer that exceeds the $10 billion threshold from seeking a waiver earlier, and the OCC would recommend that issuers that intend to seek a waiver do so promptly.”

In evaluating a waiver request, the OCC is required by statute to consider four exclusive criteria: (1) the issuer’s capital; (2) its past operations and examination history; (3) the experience of the relevant state regulator in supervising payment stablecoin and digital asset activities; and (4) the state regulator’s supervisory framework, including regulations and guidance. The statute also establishes a presumption in favor of waiver approval where the state regulator has established a certified prudential regulatory regime for digital assets as of April 19, 2025, and the state regulator has approved at least one issuer under that regime. To overcome the presumption, the OCC must provide “clear and convincing evidence” that the issuer does not substantially meet the waiver criteria or that it poses “significant safety and soundness risks to the financial system of the United States.”

For issuers that do not obtain a waiver, the proposed 360-day transition timeline requires coming into compliance with the full suite of OCC requirements. Transitioning issuers must also submit a capital analysis to the OCC within 270 days of crossing the threshold, and “issuers are encouraged to submit a plan promptly to provide ample time to raise additional capital before transitioning to the OCC’s regulatory framework, if needed.” The OCC will conduct an initial examination within six months of the issuer’s certification of compliance with the federal framework, with the OCC stating it “intends to conduct this examination well before the six-month outer limit” to ensure an effective transition.

This aspect of the proposal would have implications for state-approved nonbank issuers’ strategic plans, and the regime they would operate under at scale. It also has implications for the broader competitive landscape of stablecoin issuers, and whether a class of large, state-approved nonbank payment stablecoin issuers may operate alongside those within federal oversight.

Foreign Issuers

A foreign entity may not offer a payment stablecoin in the United States unless it complies with the framework tailored specifically to the foreign issuance. To do so lawfully, the U.S. Department of the Treasury must have formally determined that the issuer’s home jurisdiction is comparable with the GENIUS Act, and the issuer must register with the OCC. Under the GENIUS Act, a registration application is automatically “deemed approved” 30-days after the OCC receives it, unless the OCC affirmatively rejects it in writing. The OCC review will consider certain factors, including the financial and managerial resources of the issuer’s U.S. operations, its U.S. financial stability risk (including the ability to ensure timely redemption for U.S. customers), and whether it poses illicit finance risk.

Once registered, a foreign issuer must “fully accede to any request by the OCC regarding reporting, supervision, or examination.” On an ongoing basis, an OCC registered foreign issuer must, among other things: (1) maintain sufficient reserves with a U.S. financial institution(s) to meet redemption requires; (2) file a monthly report to the OCC detailing the amount of outstanding stablecoins held by U.S. customers, the value and tenor of the reserve assets backing those outstanding tokens; and (3) file a notice and plan with the OCC in the event that the value of the issuer’s reserves fall below the amount of total outstanding stablecoins.

The proposed foreign-issuer regime makes clear that foreign issuers that serve U.S. customers would do so through a formal and compliance-forward regime. Foreign issuers that are considering availing themselves of this avenue for issuing stablecoins would need to evaluate not only whether they can meet the requirements for U.S. access but also whether the associated cost and compliance are consistent with their strategic plans.

Looking Forward

For payment stablecoin issuers, this is the opportunity to shape the outcome of several elements of the regulatory proposal. For all potential permitted payment stablecoin issuers a key task should assess the yield prohibition’s rebuttable presumption framework. A subset of those issuers – namely state-approved nonbank issuers, and foreign issuers – should also assess whether their current or planned arrangements would be permissible under the proposed framework. For state-approved nonbank issuers approaching (or planning to approach) the $10 billion issuance threshold for federal oversight, the focus should be on evaluating the proposed waiver criteria and their current strategic plans for growth in the context of the federal and home state regulatory regimes. Lastly, foreign issuers that plan to register with the OCC should monitor U.S. Treasury comparability determinations and evaluate the proposed requirements for offering stablecoins in the United States against their capabilities and potential expansion strategies.

Put Patomak’s Expertise to Work

As the federal regulatory framework for payment stablecoins takes shape, payment stablecoin issuers and providers of services to issuers face a rapidly evolving set of requirements. Patomak assists clients in understanding regulatory policy proposals, engaging constructively with regulators during rulemaking processes, and building or adapting the strategy needed to operate under the GENIUS Act implementing regulations. Patomak’s experts have served at the highest levels of the Office of the Comptroller of the Currency, Federal Reserve Board of Governors, and U.S. Department of the Treasury. To learn more about how Patomak can help your organization with the OCC’s NPR, please contact Mona Elliot at melliot@patomak.com, Keith Noreika at knoreika@patomak.com, Sam Canavos at scanavos@patomak.com, or Andrew Grub at agrub@patomak.com.