The American Bankers Association (ABA) has sharply criticized the Office of the Comptroller of the Currency (OCC) for removing proposed restrictions on third-party stablecoin rewards, accusing the federal banking regulator of undermining Congress’s intent when it passed the GENIUS Act. The dispute erupted hours after the OCC finalized its stablecoin regulations, allowing cryptocurrency exchanges and other platforms to continue offering certain rewards without automatically violating federal law. Banking organizations warn that the decision could encourage customers to move deposits away from traditional banks, potentially reducing money available for mortgages, small-business loans and community lending.
American Bankers Association Challenges OCC’s Final Stablecoin Rule
The American Bankers Association, one of the largest trade organizations representing U.S. banks, issued a statement on October 21 criticizing the OCC’s implementation of the GENIUS Act.
The legislation, signed into law by President Donald Trump on July 18, 2025, established a federal regulatory framework for payment stablecoins.
Under the law, stablecoin issuers are prohibited from paying interest or yield directly to holders solely for holding, using or retaining their tokens.
However, the OCC’s final rule removed a proposed provision that could have treated certain indirect rewards arrangements as presumptively unlawful.
ABA President and CEO Rob Nichols argued that the decision weakened protections intended to preserve traditional bank deposits and local lending.
The banking association acknowledged that the final regulations included positive developments but maintained that the treatment of stablecoin rewards was a serious concern.
Banks Say Crypto Platforms Could Bypass the Interest Ban
The disagreement centers on whether cryptocurrency exchanges and other companies should be allowed to reward customers for holding stablecoins.
Under the GENIUS Act, a payment stablecoin issuer cannot directly pay interest to token holders.
However, cryptocurrency platforms may operate rewards programs involving stablecoins issued by separate companies.
For example, a customer could hold USDC through a cryptocurrency exchange and receive rewards from that exchange rather than directly from Circle, the stablecoin’s issuer.
The ABA argues that these arrangements can create the economic equivalent of an interest-bearing stablecoin without technically violating the direct issuer-payment prohibition.
The association specifically raised concerns about arrangements involving:
Cryptocurrency exchanges offering stablecoin rewards.
Affiliated companies distributing incentives to stablecoin holders.
Third-party partners providing rewards connected to stablecoin products.
Business relationships that could allow issuers to indirectly fund prohibited payments.
According to the ABA, removing the proposed safeguards could allow companies to structure rewards programs around the statutory prohibition.
However, this is the banking association’s interpretation of the rule, not a legal determination that existing third-party rewards programs violate the GENIUS Act.
OCC Removes Proposed Restrictions on Third-Party Rewards
The OCC’s original proposal included a presumption that certain business arrangements between stablecoin issuers and third parties could violate the law’s prohibition on interest payments.
The final rule eliminated that presumption.
Instead, the regulator will examine individual arrangements to determine whether they constitute an attempt to evade the law.
An OCC official explained that the agency did not believe the original proposal adequately reflected the developing nature of the stablecoin market.
The regulator also emphasized that it retains enforcement authority against arrangements designed to circumvent the statutory prohibition.
The distinction is important:
Direct issuer-paid interest: Remains prohibited under the GENIUS Act.
Third-party stablecoin rewards: Are not automatically prohibited under the OCC’s final rule.
Indirect arrangements designed to evade the law: May still trigger regulatory enforcement.
The OCC’s approach does not guarantee that every rewards program is lawful.
Instead, companies must evaluate whether their specific arrangements comply with the legislation.
Community Banks Warn of an $850 Billion Lending Threat
The Independent Community Bankers of America (ICBA) also criticized the OCC’s decision.
The organization argues that allowing stablecoin rewards could encourage customers to move money from traditional savings accounts into cryptocurrency-based products.
Community banks rely heavily on customer deposits to fund lending activities.
If substantial amounts of money move into stablecoins, banking organizations warn that smaller institutions could face higher funding costs or reduced lending capacity.
ICBA President and CEO Rebeca Romero Rainey cited industry analysis suggesting that widespread stablecoin adoption could reduce community bank lending by at least $850 billion over time.
That figure is a projection based on the association’s assumptions, not an amount already withdrawn from banks or a confirmed economic loss.
The potential consequences identified by banking groups include:
Reduced small-business lending in local communities.
Less funding for mortgages and consumer loans.
Higher deposit rates as banks compete to retain customers.
Increased pressure on smaller banks with fewer alternative funding sources.
However, the actual impact will depend on how widely stablecoins are adopted, where reserve assets are held and how consumers use digital dollar products.
Crypto Industry Supports OCC’s More Flexible Approach
Cryptocurrency industry organizations have taken a different position.
The Blockchain Association welcomed the OCC’s decision to remove the proposed restrictions, arguing that the final rule more closely follows the language Congress actually enacted.
Crypto advocates maintain that the GENIUS Act explicitly prohibits stablecoin issuers from paying interest but does not impose the same categorical ban on independent third-party rewards programs.
From their perspective, expanding the prohibition through regulatory interpretation could restrict financial competition beyond what Congress authorized.
Supporters of stablecoin rewards argue that allowing cryptocurrency platforms to offer incentives could provide consumers with more choices and encourage innovation in digital payments.
The debate therefore involves two competing priorities.
Banking organizations want stronger restrictions to protect deposits and lending, while cryptocurrency companies want regulators to preserve financial competition and avoid expanding the law beyond its written requirements.
Neither position resolves the underlying legal question of how particular third-party arrangements should be treated.
Coinbase Remains at the Center of Stablecoin Rewards Debate
Coinbase has become one of the most prominent companies associated with the stablecoin rewards debate.
The exchange offers eligible customers rewards on certain USDC balances, creating a product that competes with some traditional savings options.
Banking organizations argue that programs like these could attract customers who would otherwise keep their money in conventional deposit accounts.
Coinbase and other cryptocurrency companies have defended third-party rewards as legitimate financial incentives that should not automatically be treated as issuer-paid interest.
The disagreement has also influenced negotiations surrounding the CLARITY Act, legislation intended to establish broader cryptocurrency market regulations.
The Senate’s efforts to advance the legislation have stalled amid disagreements involving stablecoin rewards and other digital asset policy issues.
The OCC’s final rule may intensify that debate because it leaves room for qualifying third-party rewards programs while preserving case-by-case enforcement.
Stablecoins and Bank Deposits Remain Different Financial Products
The dispute comes as financial institutions introduce new blockchain-based dollar products.
JPMorgan Chase recently expanded its JPM Coin deposit token onto Ethereum, while SoFi launched an interest-bearing tokenized deposit product for eligible consumers.
However, tokenized bank deposits and payment stablecoins operate under different legal frameworks.
Traditional bank deposits can earn interest and may qualify for FDIC insurance, subject to applicable coverage limits.
Payment stablecoins generally do not qualify for FDIC deposit insurance simply because they represent U.S. dollars.
The distinction matters because a stablecoin rewards program does not transform the underlying stablecoin into an insured bank deposit.
Consumers should understand the issuer, reserve arrangements, redemption rights and applicable protections before treating a stablecoin product as an alternative to a bank savings account.
OCC Rules Take Effect January 18, 2027
The OCC’s final GENIUS Act regulations are scheduled to become effective on January 18, 2027.
Beyond the stablecoin rewards dispute, the regulations establish requirements involving reserve assets, redemption, risk management, custody, reporting and federal supervision.
The OCC is the first federal regulator to finalize its implementation of the GENIUS Act, although other agencies are responsible for additional parts of the framework.
Anti-money laundering and sanctions-related requirements will be addressed through separate rulemaking coordinated with the Treasury Department.
Meanwhile, banking associations are expected to continue pressing regulators and lawmakers for tighter restrictions on indirect stablecoin yield.
The OCC could also take future supervisory or enforcement action if it determines that particular arrangements violate the law.
Stablecoin Rewards Become a Major Battle Between Banks and Crypto
The confrontation between the American Bankers Association and the OCC demonstrates how stablecoins are becoming a direct competitive issue between traditional banks and cryptocurrency platforms.
Banks see the potential for interest-like stablecoin rewards to draw customer deposits away from the financial institutions that fund local lending.
Cryptocurrency companies argue that the law should not be expanded to prohibit third-party incentives that Congress did not expressly ban.
The OCC has chosen a case-by-case approach rather than automatically treating certain business relationships as unlawful.
That decision provides greater flexibility for cryptocurrency platforms but leaves important questions about indirect rewards and regulatory enforcement unresolved.
