The GENIUS Act in Action: The OCC Proposes Stablecoin Regulations

Under the GENIUS Act, passed on July 18, 2025, federal regulators play a key role in implementation and enforcement, as discussed in our prior Alert, "U.S. House Passes GENIUS and CLARITY Acts, Signaling Bipartisan Support for Digital Assets." The OCC now follows the Federal Deposit Insurance Corporation ("FDIC") and the National Credit Union Association in issuing proposed rules.

The OCC's NPRM would add a new Part 15 to Title 12 of the Code of Federal Regulations specific to permitted payment stablecoin issuers subject to OCC jurisdiction. Key provisions of the NPRM include:

• Interest Payment Prohibition. The NPRM would establish a rebuttable presumption that affiliate and third-party arrangements may constitute prohibited interest or yield payments. Specifically, the OCC would presume a violation if: (i) an issuer has an affiliate or third-party contract to pay interest or yield; and (ii) the affiliate or third party has a separate arrangement to pay yield to stablecoin holders.
• Licensing and Approval Process. The NPRM provides a licensing process for various types of insured and uninsured institutions. Applications are deemed approved 120 days after receipt unless the OCC denies it. The key consideration is whether the applicant's activities would be unsafe or unsound based on their financial resources, criminal backgrounds, management experience, and redemption policy. If denied, applicants would have 30 days to request reconsideration and would receive a final determination within 60 days of any hearing. Foreign payment stablecoin issuers must submit monthly reports on reserve composition and outstanding stablecoins held by U.S. customers.
• State Regulation. State-qualified payment stablecoin issuers with over $10 billion in outstanding issuance must transition to Federal supervision within 360 days or cease net new issuance. The OCC may grant waivers based on the issuer's capital, past operations and examination history, the State regulator's experience supervising digital assets, and the State's supervisory framework. A rebuttable presumption favoring approval applies if the State regulator established a GENIUS Act-certified prudential digital asset regime as of April 19, 2025, and has approved one or more issuers.
• Redemption Rights and Disclosures. Issuers must redeem stablecoins within two business days of a request or seven calendar days if redemption demands exceed 10% of outstanding issuance in 24 hours. Issuers must notify the OCC within 24 hours upon meeting the 10% threshold. An issuer must also make certain plain language disclosures, including the issuer's name, redemption obligation, reserve composition report link, and all fees (subject to seven days' notice for fee changes).
• Reserve Requirements. Issuers must maintain identifiable reserves backing outstanding stablecoins on at least a 1:1 basis. Permissible reserve assets include U.S. currency, demand deposits, short-dated Treasuries (93 days or less), reverse purchase agreements, qualifying money market funds, and tokenized versions of certain eligible reserves. The OCC is also weighing options for diversification requirements aimed at ensuring issuers can adequately cover certain portions of its daily liquidity within specified timeframes.
• Custodial Requirements and Bankruptcy Protection. Covered custodians must: (i) separately account for covered assets as belonging to customers, not the custodian; (ii) implement written policies protecting covered assets from creditors' claims; and (iii) maintain possession or control, including digital wallets where the custodian controls private keys. Omnibus accounts are permitted with appropriate safeguards. The GENIUS Act establishes a priority regime for customer claims against custodians for stablecoins used as collateral, which is why reserve assets must be identifiable, segregated, and not commingled with other assets. In bankruptcy, stablecoin holders generally receive: (i) ratable distributions from reserves if reserves are sufficient; and (ii) first priority for distributions from the bankruptcy estate if reserves are insufficient.
• Capital Requirements. De novo issuers face a minimum capital requirement of the greater of $5 million or the amount specified in chartering conditions for 36 months. All issuers must maintain an operational backstop equal to 12 months of total expenses, held in cash, FDIC-insured deposits, or short-dated treasuries (93 days or less). Issuers failing to meet capital or backstop requirements at quarter-end are prohibited from net new issuance, and two consecutive quarters of noncompliance triggers mandatory liquidation.

The OCC requests feedback on these and other aspects of the proposed rulemaking and has included 211 questions relating to all aspects of the proposal. According to the proposal, it "expects the primary effect of the GENIUS Act and the proposed rule to be an increase in the aggregate market capitalization of payment stablecoins in response to an increased demand for payment stablecoins."