From CoinDesk · By Jesse Hamilton
The U.S. agency that regulates national banks and trusts has issued the first final rule putting the GENIUS Act into place in January, though a number of other regulators are still working on other parts of the implementation.
The section on stablecoin yield doesn't offer a lot of detail on what activity may fall under the law's wide prohibition of such yield from issuers, but the crypto industry has already interpreted GENIUS to permit the rewards programs that have become commonplace with stablecoin activity on exchanges.
The final rule states that pre-existing rewards programs won't get special treatment as the OCC assesses which ones pass regulatory muster.
U.S. crypto exchanges that have long been giving people rewards for usings stablecoins will have to get the agency to sign off on those existing programs, according to the U.S. Office of the Comptroller of the Currency, the first federal banking regulator to issue a final rule under the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act.
The OCC, which oversees U.S. national banks and trusts that will play a central role in the issuance of stablecoins under the law, issued a final rule on Wednesday to establish the regulations under which the firms that issue the dollar-based tokens will operate — including in their third-party relationships with the exchanges on which their stablecoins change hands.
The agency — an independent bureau of the Treasury Department — has declined to offer examples or illustrations of what type of rewards operations may run afoul of the GENIUS Act, which declared that payments to customers made "solely in connection with the holding, use, or retention of such payment stablecoin" won't be allowed. The industry, which won't get any safe harbors for existing programs, will just have to test the agency's case-by-case oversight to get a better sense of the rule, which is set to go live on January 18.
The regulator said it "will apply the language of the statute to the facts and circumstances of any particular arrangement." However, the agency did suggest that the word "solely" in the prohibition is carrying a lot of weight, and that a reward that "might be made, at least in part, for other reasons" would fall outside the ban in the GENIUS Act.
Payment stablecoins hew to the value of the U.S. dollar and are designed — as suggested by the name — to maintain a steady value in a crypto industry in which other assets are known to be famously volatile. The sector is currently led by Tether's USDT and Circle's USDC, but a number of entrants have begun crowding into the space.
Wednesday's extensive rule establishes the start-to-finish process for regulated firms and foreign companies to issue stablecoins in the U.S. and for how firms will keep custody of them. But the rule is also meant to operate alongside a number of similar rules still being worked on by other agencies, and this effort leaves aside the Bank Secrecy Act components that will be handled by other arms of the Treasury.