OCC Lets Crypto Exchanges Keep Paying Yield on Stablecoins

Cryptocurrency exchanges can keep paying interest-like rewards to customers under new federal rules published Wednesday by the Office of the Comptroller of the Currency — a decision banks warn could drain trillions in deposits from the banking system.

The rules implement the GENIUS Act, signed into law last year to codify regulation of stablecoin issuers. They draw a sharp line between two sides of the market: issuers and exchanges.

Stablecoin issuers such as Circle remain prohibited from paying interest to people holding their coins. But the exchanges that trade and hold those stablecoins — Coinbase, Robinhood and others — can pass along earnings from those coins to customers in interest-like rewards, on a "case-by-case basis," regulators said.

That outcome falls short of what banks wanted. Banking groups had pushed for the practice to be banned outright.

Why the interest fight matters

Stablecoins are a type of cryptocurrency designed to hold a steady value, typically $1 per coin. They're backed by bank deposits and U.S. Treasuries, and those underlying assets earn interest.

That interest sits at the center of the fight between banks and crypto companies. The crypto industry wants to convert the yield that issuers earn on the bonds and dollars backing stablecoins into a return for the customers holding the coins. The OCC's new rules let exchanges do exactly that.

The competitive gap is already wide:

• Coinbase pays yields of up to 3.5% on USDC balances.
• The average traditional savings account pays 0.38%, according to the latest Federal Deposit Insurance Corp. figures.
• That spread is roughly nine to one in Coinbase's favor at the top end.

If stablecoins and exchanges outcompete banks on yield, traditional bank customers could move their savings out of banks and into crypto — a phenomenon known as deposit flight. The banking industry has said that would shrink banks' capacity to lend, and in a hypothetical worst-case scenario, force some banks to close or fail.

Lawmakers have already fought over this terrain. When Congress drafted the CLARITY Act, one source of intense debate was how stablecoins would affect the traditional banking sector.

What did the banks say?

The American Bankers Association, the industry's umbrella lobby group, attacked the OCC's decision in a statement. The rule, the ABA said, will threaten "the funds banks use to make the loans that drive the U.S. economy."

The group went further on congressional intent. The rule "will preserve the status quo for crypto platforms despite Congress's clear intent to protect local lending," the ABA said.

The OCC has not, according to the source material, publicly countered those claims. The rules stand as published.

Why consumer groups sided with banks

The opposition to exchange rewards cuts across usual battle lines. Banks and consumer advocacy groups — typically opponents in fights over how to regulate the nation's financial system — have been allies on this issue.

Consumer groups worry that customers will treat these interest-like reward programs as equivalent to a bank account. But the cryptocurrency world has no counterpart to federal deposit insurance, such as the coverage the FDIC provides to bank customers.

Phillip Basil, director of economic growth and financial stability at Better Markets, framed the OCC rule as a regulatory escape hatch. The OCC "has implemented a rule that provides a free pass to stablecoin issuers to do the activities of banks without any of the protections that keep our banking system safe," Basil said in a statement.

What happens next?

The rules cement a structural split: Circle and other issuers stay barred from paying interest directly, while Coinbase and Robinhood keep a sanctioned path to pass yields through to customers, case by case. With exchange yields running at 3.5% against a 0.38% average bank savings rate, the OCC has effectively declined to remove the incentive for deposit flight — leaving the banking industry to press its case in Congress as the CLARITY Act debate continues.