New Proposal Could Restrict Stablecoin Branding and Ban Rewards

The Office of the Comptroller of the Currency (OCC) has released a 376-page proposal outlining how it plans to implement the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act.

The draft framework tightens oversight of dollar-backed stablecoins, particularly around branding limits, yield bans, and redemption standards.

The proposal signals a shift toward treating stablecoins strictly as payment instruments rather than interest-bearing alternatives to bank deposits.

Core Structural Restrictions

Single-Brand Stablecoin Rule

The OCC is considering restricting each permitted issuer to one branded stablecoin.

This would affect “white-label” models where a single regulated entity issues multiple branded tokens for partners. Firms such as Paxos, which issue stablecoins for companies including PayPal, could face restructuring requirements if the rule is finalized.

Ban on Yield and Rewards

The proposal introduces a strict ban on paying any form of interest or rewards to stablecoin holders.

This includes:

• Direct yield payments
• Cashback incentives
• Loyalty-style token rewards

The rule also targets indirect arrangements where issuers compensate affiliates who then distribute rewards to users.

Redemption Requirements

Under the draft:

• Issuers must complete redemptions within two business days.
• If daily redemptions exceed 10% of total supply, the window may extend to seven business days.

These standards aim to formalize liquidity management and reduce redemption risk during stress events.

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Industry Impact

• Coinbase and Circle may need to review revenue-sharing and incentive structures.
• White-label issuers could be required to consolidate branding.
• Traditional banks have largely supported restrictions to reduce the risk of deposit outflows into interest-bearing stablecoins.

Timeline

The OCC has opened a 60-day public comment period. Final rules are expected within months, with the broader stablecoin regime projected to take effect by January 2027.

If implemented as proposed, the framework would narrow the role of stablecoins in the U.S., limiting them to payment functionality and removing yield-based growth strategies from the market.

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