GENIUS Act Rules Finalized: These Tailwinds for the Crypto Market

Original | Odaily (@OdailyChina)

Author | Asher (@Asher_ 0210)

US stablecoin regulation has taken another key step forward.

On October 21, the US Office of the Comptroller of the Currency (OCC) published final rules implementing the GENIUS Act, clarifying the issuance, reserve, redemption, custody, and risk management requirements for payment stablecoins under its jurisdiction. The rules will take effect on January 18, 2027. US Treasury Secretary Bessent called it a "watershed" moment for American finance, arguing that it provides a clear foundation for innovation and competition in payment stablecoins.

Compared with the earlier draft, the final rules leave more room for certain commercial arrangements, most notably by deleting the deemed-violation provision targeting certain third-party stablecoin reward arrangements. This change has drawn attention from the crypto industry and also sparked opposition from the US banking sector.

Below, Odaily explains what exactly these rules have relaxed, which constraints remain in place, and what opportunities they may bring to the crypto industry.

How are stablecoins issued, and what are the reserve and redemption requirements?

The GENIUS Act was signed into law in July 2025, and the implementing rules published by the OCC further clarify the requirements that stablecoin issuers within its regulatory scope must comply with, mainly covering issuance eligibility, reserve management, redemption, and custody.

• Issuing stablecoins requires the appropriate qualifications. Banks can conduct business through qualifying subsidiaries, and non-bank entities also have a path to apply to become federally qualified issuers. The rules also cover certain state-qualified issuers and foreign issuers, but this does not mean all companies can directly enter the US market; they still need to meet the corresponding approval or registration requirements.
• Every stablecoin must be backed by sufficient qualified reserves. The reserve value of a payment stablecoin must at least cover all outstanding tokens, and permitted assets include cash, qualifying bank deposits, short-term US Treasury securities, and related instruments. Issuers cannot use the funds users exchange for stablecoins to invest freely in high-risk assets.
• Redemption and custody are also subject to constraints. Issuers need to establish clear redemption policies, disclose relevant conditions and fees, and manage reserve liquidity to ensure they can handle user redemptions. The rules also impose requirements on related custody activities, risk management, capital, and audit reporting, so that regulation covers the main stages of stablecoins from issuance to redemption.

This means issuers must not only prove whether their "reserves are sufficient," but also explain who holds the reserves, how users can convert back to US dollars, and how they will handle concentrated redemptions.

The above rules will take effect on January 18, 2027. The OCC will separately announce when it will begin accepting applications and exemption requests, while anti-money laundering and sanctions-related requirements will be developed separately.

Room for third-party rewards is retained, but the interest payment ban remains

Compared with the draft, the most closely watched adjustment in the final rules is the relaxation of the treatment of certain third-party reward arrangements. The GENIUS Act prohibits issuers from paying interest or yield to users solely because they hold, use, or retain payment stablecoins. However, whether rewards distributed by trading platforms or partners should also count as issuers paying interest indirectly has long been controversial.

The OCC's earlier draft stipulated that certain reward arrangements involving affiliates and third parties would first be presumed to be violations, and the parties involved would need to submit materials to prove compliance. The final rules delete this provision and instead adopt a case-by-case review to determine whether a specific arrangement violates or circumvents the interest payment ban.

This means that the room for trading platforms to distribute stablecoin rewards is retained, but it has not been fully cleared. If issuers merely use other entities to pay yield on their behalf, they may still violate the ban; existing reward programs must also undergo the same review.

Another adjustment concerns large redemptions. Under the draft, when an issuer received redemption requests exceeding 10% of outstanding issuance within 24 hours, the redemption period would automatically be extended to seven calendar days. The final rules remove this arrangement. The OCC believes that automatic extensions could make users more worried about not being able to retrieve their funds in time, potentially triggering or worsening a run.

For issuers and platforms, the former adjustment preserves the possibility of attracting users through rewards, while the latter avoids automatic extensions during large redemptions. Both reduce the restrictions in the draft, but full reserves, redemption obligations, and the issuer interest payment ban remain in force.

Why are banks opposed to stablecoin rewards?

Stablecoin rewards give platforms a chance to compete with banks for users' idle funds. If stablecoins only offer convenience for transfers and trading, users mainly hold them for usage needs; if platforms can also offer attractive rewards, they may attract more idle funds that would otherwise remain in bank accounts.

The American Bankers Association (ABA) criticized the final rules for deleting proposed safeguards against indirect yield arrangements involving affiliates, exchanges, and distribution partners, which could allow issuers to formally avoid the ban while offering economically similar yields, threatening the funds banks use to make loans.

Community banks are especially concerned about fund concentration. Even if the US dollars used to buy stablecoins eventually enter some banks in the form of reserve deposits, they may not return to the original local banks and could instead be concentrated in a small number of large custodian banks and reserve managers. The Independent Community Bankers of America (ICBA) warned that the spread of stablecoins could reduce future community bank lending by at least $850 billion. However, this is the association's model forecast, not a loss already caused by the new rules, nor a certain outcome.

From issuers to public chains, which areas may benefit?

The first to benefit may be stablecoin issuers and distribution platforms such as Circle and Coinbase. With clearer issuance, reserve, and redemption requirements, banks, payment companies, and enterprises can more easily assess how to integrate stablecoins. Expanding use cases are expected to drive growth in stablecoin issuance, platform-held balances, and exchange demand, bringing more revenue opportunities to related companies. The room left for third-party rewards also allows platforms to continue exploring ways to attract users and retain funds through rewards.

Stablecoin payments are another direction that stands to benefit. Cross-border remittances, merchant payments, and corporate settlements all have the opportunity to become entry points for stablecoins to move beyond crypto trading. Enterprises integrating these services need wallets, exchange, custody, and reconciliation tools, and related infrastructure service providers may also gain more business.

In addition, funds entering on-chain may also flow into DeFi and RWA. For example, after users receive stablecoins, they can deposit temporarily unused balances into lending protocols or buy tokenized US Treasuries to earn yield. Stablecoin payments bring users and funds, while on-chain financial products have the opportunity to capture subsequent investment demand.

For public chains that host stablecoins, more transfers, payments, and financial activities are expected to bring growth in transaction volume, fees, and application demand. Ecosystems with ample stablecoin liquidity and mature financial applications are better positioned to capture these businesses.

For the crypto market, what is more worth looking forward to is the potential buying power brought by stablecoin adoption. New US dollars entering on-chain are initially used for payments and settlement, but as users begin to participate in on-chain trading, lending, and investment, some of them may also turn into new demand for crypto assets such as BTC and ETH.

In the past, crypto market cycles were driven by speculation and leverage; the next major bull market may come from US dollars continuously flowing on-chain from the traditional financial system.