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Payment stablecoin issuers under OCC jurisdiction will be subject to reserve, redemption, capital, and risk management standards when the GENIUS Act takes effect on January 18, 2027.

By Jenny Cieplak, Arthur S. Long, Parag Patel, Pia Naib, Connor Kelly Jobes, and Deric Behar

Key Points

  • The OCC eliminated the Proposal’s rebuttable presumption that certain arrangements between a payment stablecoin issuer and its affiliates or related third parties violate the GENIUS Act’s prohibition on paying interest or yield.
  • The regulation adopts a “hybrid approach” to reserve diversification that pairs a principles-based standard with a 5% daily liquidity minimum and a 40% single-counterparty exposure limit, supported by new stress-testing and buffer requirements.
  • The Final Rule retains the Proposal’s 24-hour notice requirement for redemption requests exceeding 10% of outstanding issuance value in a single 24-hour period, now measured by brand instead of across all of an issuer’s payment stablecoins.
  • The OCC generally expects that it will waive the prior approval requirement for existing stablecoin issuers currently operating in the US that have a substantially complete application pending before the OCC, thus allowing them to keep issuing while the OCC reviews their applications, but sees no general basis to waive other requirements of the GENIUS Act or the Final Rule.

On October 21, 2026, the Office of the Comptroller of the Currency (OCC) issued a final rule (the Final Rule) implementing the Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act) for entities subject to its jurisdiction. The OCC received approximately 328 comments on its March 2, 2026, notice of proposed rulemaking (the Proposal) (see this Latham Client Alert), and the agency generally adopted the Proposal with certain significant modifications. The Final Rule takes effect on January 18, 2027, which is the GENIUS Act’s effective date.

The OCC is separately addressing the GENIUS Act’s requirements related to the Bank Secrecy Act, anti-money laundering, and sanctions, in coordination with the Department of the Treasury’s Financial Crimes Enforcement Network and the Office of Foreign Assets Control, through a proposal published on June 24, 2026 (see this Latham blog post).

Alongside the Final Rule, the OCC issued OCC Bulletin 2026-51, on applications and waiver requests, and OCC Bulletin 2026-52, requesting comment on revised weekly and quarterly reporting forms for permitted payment stablecoin issuers.

Background

The GENIUS Act, which was enacted on July 18, 2025, establishes a comprehensive regulatory framework for payment stablecoin1 activities in the US. It generally prohibits any person other than a permitted payment stablecoin issuer from issuing a payment stablecoin in the US, and prohibits digital asset service providers from offering or selling a payment stablecoin to a person in the US unless the stablecoin is issued by a permitted payment stablecoin issuer (subject to an exception for certain foreign payment stablecoin issuers that meet specified requirements) (see this Latham Client Alert).

OCC Jurisdiction

Under the GENIUS Act, the OCC has regulatory or enforcement authority over:

  1. subsidiaries of insured national banks, federal savings associations, and insured federal branches approved to issue payment stablecoins;
  2. federal-qualified payment stablecoin issuers, which may include nonbank entities, uninsured national banks (such as national trust banks), and uninsured federal branches of non-US banks;
  3. certain nonbank state-qualified payment stablecoin issuers, including those that exceed $10 billion in total consolidated outstanding issuance value and must transition to federal oversight unless they receive a waiver or cease issuing new payment stablecoins on a net basis; and
  4. foreign payment stablecoin issuers that register with the OCC.

Interest and Yield Prohibition

Section 4(a)(11) of the GENIUS Act prohibits permitted payment stablecoin issuers and foreign payment stablecoin issuers from paying the holder of a payment stablecoin “any form of interest or yield (whether in cash, tokens, or other consideration) solely in connection with the holding, use, or retention” of the payment stablecoin. The Act also directs the OCC and other regulators to issue rules to carry out its requirements and to prevent evasion of them.

The Proposal would have presumed that an issuer was paying prohibited interest or yield where the issuer had a contract, agreement, or other arrangement to pay interest or yield to an affiliate or a “related third party” (defined as a person offering to pay interest or yield to holders as a service, or a person on whose behalf or under whose branding the issuer issues payment stablecoins), and that affiliate or related third party had an arrangement to pay interest or yield to holders of the issuer’s payment stablecoins. An issuer could have rebutted the presumption by submitting written materials demonstrating that the arrangement was not prohibited and not an attempt at evasion.

The Final Rule eliminates the presumption, which the OCC said would be inappropriate in a “nascent market” and which “could have been both overinclusive and underinclusive.” Instead, the Final Rule tracks the GENIUS Act, prohibiting an issuer from paying a holder any form of interest or yield solely in connection with the holding, use, or retention of the payment stablecoin.2

The OCC also made the following points:

  1. It will initially monitor arrangements through which issuers may pay interest or yield to holders, directly or indirectly, as part of its review of applications and ongoing supervision.
  2. It will take action and provide guidance, as appropriate, where it identifies violations or evasion, and anticipates it may later propose a rulemaking clarifying the interest or yield prohibition.
  3. It declined to adopt a de minimis exemption, a cure period, or safe harbors for rewards programs that predate the GENIUS Act, white-label partners (companies on whose behalf or under whose branding an issuer issues payment stablecoins), arrangements subject to the federal securities laws, or payments for services. In declining to adopt a safe harbor for white-label partners, the OCC noted that “[p]ayments to and from white-label partners may be more likely to be made on behalf of a permitted payment stablecoin issuer or foreign payment stablecoin issuer than other types of payments.”
  4. The word “solely” in the GENIUS Act prohibition “is best read under its plain terms to exclude payments made in connection with reasons other than holding, using, or retaining a payment stablecoin,” although the OCC will look to the substance of a transaction to identify evasion.
  5. Payments for bona fide services generally would not be prohibited, “[a]bsent additional facts to the contrary.”
  6. In keeping with the GENIUS Act’s definition of “payment stablecoin,” the yield prohibition does not apply to deposits, including deposits in tokenized form.
  7. The prohibition can reach indirect payments. Interest or yield paid by an agent on the issuer’s behalf solely in connection with the holding, use, or retention of a payment stablecoin is covered, and whether a transaction-based payment is prohibited is a fact-specific inquiry.

The OCC acknowledged commenters’ concerns that yield-bearing arrangements could draw deposits from banks, particularly community banks, but stated the effect is uncertain and that it will monitor developments and may revise the rule if necessary. In a separate fact sheet issued for community banks, the OCC noted that the GENIUS Act and the Final Rule permit bank deposits to serve as reserve assets, “providing a continuing role for banks in this new industry,” and that it is “closely monitoring potential deposit outflows as the industry develops.”

Reserve Assets

Diversification and Concentration

The Proposal offered two alternatives, a principles-based requirement with a quantitative safe harbor (Option A) or mandatory quantitative requirements (Option B).

The Final Rule adopts what the OCC describes as a “hybrid approach,” pairing Option A’s principles-based requirement with a modified and limited set of Option B’s quantitative requirements. A permitted payment stablecoin issuer must:

  1. Maintain at least 5% of its reserve assets (reduced from 10% under the Proposal) as demand deposits (or other deposits that may be withdrawn upon request at any time), funds in share accounts payable on demand, or money standing to the credit of an account with a Federal Reserve Bank
  2. Limit its exposure to any one counterparty to no more than 40% of its reserve assets, excluding exposures to the US government, exposures to an appropriate custodian resulting from reserve assets held in its custody, and exposures resulting from centrally cleared repurchase and reverse repurchase agreements

Insured Deposits and Custodians

The Final Rule does not adopt the proposed requirement that issuers with $25 billion or more in outstanding issuance value hold at least 0.5% of reserve assets, up to $500 million, as insured deposits or insured shares. The OCC agreed with commenters that such a requirement could introduce operational risk not justified by the reduction in credit risk.

The Final Rule excludes reserve assets held in the custody of one or more eligible financial institutions from the 40% counterparty limit, provided that the issuer identifies itself to the custodian as a permitted payment stablecoin issuer, ensures that the custodian commits to adhering to section 10 of the GENIUS Act and its implementing regulations,3 and conducts appropriate due diligence and ongoing monitoring of the arrangement.

Reserve Management and Stress Testing

The Final Rule introduces the defined term “reserve asset value” and requires that it equal or exceed outstanding issuance value at all times, with no allowance for temporary intraday shortfalls. An issuer that falls below the required minimum must notify the OCC on any day the shortfall occurs and may not issue new payment stablecoins until it cures the shortfall, unless the OCC permits otherwise. If the shortfall lasts 15 consecutive business days (a period the OCC may extend in its sole discretion), the issuer must begin liquidating reserve assets and redeeming outstanding payment stablecoins without charging redemption fees. An issuer must also ensure that its reserve portfolio can support timely redemption in normal and adverse conditions, including, to the extent necessary, through a buffer of reserve assets above outstanding issuance value.

The Final Rule does not adopt the Proposal’s once-a-month limit on withdrawing surplus reserves, instead permitting withdrawals at any time after appropriate due diligence and confirmation that reserve asset value would not fall below outstanding issuance value. It also does not apply this limitation to income earned on reserve assets.

Under the new risk management requirements, an issuer must demonstrate to the OCC its ability to reliably access and monetize reserve assets in normal and stressed conditions — considering market access, financing channels, haircut assumptions, and operational readiness — and must conduct regular stress testing, including in significant positive-interest-rate scenarios.

Issuers of non-dollar-denominated payment stablecoins must hedge residual foreign exchange risk, subject to prior notice to and approval by the OCC and a prohibition on speculation.

Multi-Brand and Special Purpose Vehicle Issuance

The Final Rule does not adopt a one-brand-per-issuer requirement, which the OCC acknowledged is not clearly mandated by the GENIUS Act. Noting, however, that a one-brand-per-issuer structure may better protect stablecoin holders, the OCC accommodated business models that use multiple special purpose vehicle (SPV) issuers. Under an SPV structure, each brand is issued by a separately licensed legal entity, often a subsidiary, so that the reserves backing each brand are legally separate and a run on one brand is less likely to spread to the others.

The final definition of “outstanding issuance value” (i.e., “the total par value of all the payment stablecoins issued by a permitted payment stablecoin issuer”) no longer includes the word “consolidated,” so each SPV issuer need only hold reserves against the payment stablecoins it issues. Each SPV issuer still requires its own license, and the OCC intends to examine a family of SPV issuers in a single examination.

Redemption

The OCC eliminated the Proposal’s automatic extension of the redemption period from two business days to seven calendar days when redemption demands exceeded 10% of outstanding issuance value in a single 24-hour period, agreeing with commenters that it “could prove pro-cyclical and trigger or exacerbate runs.”

The Final Rule retains the Proposal’s requirement that an issuer must notify the OCC within 24 hours if it receives redemption requests exceeding 10% of the outstanding issuance value of any brand of payment stablecoin in a single 24-hour period. The issuer may request an extension of the two-business-day redemption period for any such redemption requests, which the OCC may grant or deny in its discretion. The OCC stated that this authority would be used sparingly and that it expects the granting of extensions to be rare.

The Final Rule also retains the two-business-day ceiling for timely redemption. The obligation to redeem begins once the issuer has received a customer’s redemption order and, if its onboarding procedures are reasonably designed not to unduly delay onboarding (including in times of stress), the customer has been onboarded and all other legal conditions to permit redemption have been met. Redemption occurs when the issuer has fully processed and initiated the outgoing transfer (or credited the customer’s account at the issuer, if requested).

The Final Rule also requires disclosures that payment stablecoins are not legal tender; not issued, guaranteed, or approved by the US; not deposits; not backed by the full faith and credit of the US; and not subject to Federal Deposit Insurance Corporation deposit insurance or National Credit Union Administration share insurance.

An issuer must be legally obligated to redeem any amount of one payment stablecoin or more from any holder, subject to applicable law and onboarding, even if its business does not focus on retail customers. It should also have procedures to onboard such holders, particularly in times of stress. Issuers may charge properly disclosed fees, except in a liquidation for failure to meet liquidity, capital, or operational backstop requirements or pursuant to an enforcement action. Required disclosures must name the issuer, allowing holders to identify the issuer behind a white-label coin.

The Final Rule narrows the term “customer” to a person that purchases products or services directly from the issuer or asks the issuer directly to convert, redeem, or repurchase a payment stablecoin. A holder that acquired a payment stablecoin from a third-party distributor (including a white-label partner) not acting as the issuer’s agent would not be considered a customer unless and until it seeks redemption from the issuer.

Capital and Operational Backstop

The Final Rule replaces the Proposal’s common equity tier 1 and additional tier 1 capital measure with a measure “generally based on GAAP tangible equity,” equal to the issuer’s equity accounts under US GAAP less goodwill and other intangible assets, deferred tax assets (net of valuation allowances), and operational backstop assets funded by equity.

Other key changes include the following:

  1. The $5 million minimum capital floor, which the Proposal applied only during the de novo period, now applies on an ongoing basis.
  2. An issuer may fund up to 50% of its operational backstop requirement (12 months of total expenses) with subordinated debt generally consistent with tier 2 capital criteria, including a minimum five-year maturity, a 20% annual reduction in the qualifying amount during the final five years before maturity, and a prohibition on affiliate funding.
  3. Issuers must meet minimum capital and backstop requirements at all times and notify the OCC within 24 hours of any failure during a quarter. An issuer that remains noncompliant at quarter-end may not issue new payment stablecoins beginning the following month, and an issuer that fails to meet the requirements at the end of two consecutive quarters must begin liquidation.
  4. The OCC may permit an issuer to continue operating with its backstop below the required amount after a temporary disruption if the issuer submits, within seven days, a plan the OCC deems viable to restore compliance within 90 days.

Other Notable Changes

Other key modifications from the Proposal include the following:

  1. Permitted activities. The list of permitted activities is now expressly exclusive and adds holding non-payment stablecoin digital assets as principal as necessary to pay fees or conduct testing, establishing trust arrangements over reserve assets for the sole benefit of holders, managing foreign exchange risk, and hiring third parties. The Final Rule also pre-approves repurchase agreements in which the Treasury bills sold have a maturity of 93 days or less.
  2. Supervision. The extended examination cycle for smaller issuers is shortened to 18-24 months (from 18-36 months), the trading volume criterion is removed, and the $1 billion outstanding issuance value threshold now includes affiliated issuers. The OCC declined to impose real-time reporting.
  3. Assessments. The 35% assessment discount (which the OCC may increase up to 55%) now applies to all stablecoin reserve assets, including reserves held above the required minimum. Registered foreign payment stablecoin issuers will, at least initially, pay fee-based assessments in lieu of asset-based semiannual assessments.
  4. State-qualified issuers. A transitioned nonbank state-qualified issuer will cease to be supervised by the OCC once the OCC determines that it no longer exceeds $10 billion in total consolidated outstanding issuance value, with the $10 billion transition threshold measured at a point in time and not as a rolling average.
  5. Applications. The OCC added as a review factor whether an applicant’s proposed structure adequately addresses run risks and ensures the ability to redeem.
  6. Custody. “Covered assets” under the custody provisions are limited to payment stablecoins offered, sold, or made available to persons in the US and, for payment stablecoins used as collateral, to those a covered custodian has actual knowledge are so used. A new provision permits sub-custodian omnibus accounts that commingle a covered custodian’s own assets with covered assets.

Waivers and Application Timing

Beginning January 18, 2027, an entity generally must be approved as a permitted payment stablecoin issuer to issue a payment stablecoin in the US, and issuing without approval carries criminal penalties. Section 5(f) of the GENIUS Act permits the OCC to waive requirements of the Act or the Final Rule for up to 12 months beginning on January 18, 2027, for two categories of applicants with substantially complete applications pending on or before that date:

  1. insured national banks, federal savings associations, and insured federal branches applying for a subsidiary to become a permitted payment stablecoin issuer; and
  2. nonbank entities, uninsured national banks, and uninsured federal branches applying to become federal-qualified payment stablecoin issuers.

The OCC may grant a waiver if it finds that would be in the public interest or that extraordinary circumstances justify it, and the OCC generally expects any waiver to be limited to the relief necessary to ensure that compliance with the Act is not impossible or impracticable.

In OCC Bulletin 2026-51, which clarifies the process for filing applications and requesting waivers under the GENIUS Act, the OCC explained the following:

  1. The OCC generally expects to grant waivers from the prior approval requirement for existing issuers currently operating in the US that submitted a substantially complete application before the effective date, unless its review identifies more compelling reasons to deny the request.
  2. The OCC has not identified compelling, generally applicable reasons to waive any other requirement (noting that issuers have had 18 months since enactment to prepare) or to grant waivers to issuers or prospective issuers not currently operating or issuing in the US, which the OCC generally expects to begin operations only after receiving approval.
  3. The OCC will evaluate waiver requests on their merits, generally act on them by January 18, 2027, and expects to limit each waiver to the time necessary to address the reasons for granting it. A request should explain its basis, the extent of the requirements to be waived, the potential for disruption to existing operations, and the applicant’s plan to come into compliance.
  4. The OCC will notify an applicant within 30 days of receipt whether its application is substantially complete and will act within 120 days after it becomes substantially complete. For applications filed before the effective date, the 120-day period begins on the later of January 18, 2027, or the date of substantial completeness. An application the OCC does not deny within that period is deemed approved.

The OCC stated that it will begin accepting applications and waiver requests after the Office of Management and Budget (OMB) approves the related information collection, and will make a separate announcement to that end.

Next Steps

Existing stablecoin issuers that intend to continue issuing in the US after January 18, 2027, should consider preparing a substantially complete application to become a permitted payment stablecoin issuer. Because only an issuer with a pending application may request a waiver, issuers should also prepare a request to waive the prior approval requirement and submit both once the OCC begins accepting them.

Comments on the revised weekly and quarterly reporting forms in OCC Bulletin 2026-52 are due November 23, 2026. Subject to OMB approval, the forms would take effect as of the January 25, 2027, report date for the weekly form and the March 31, 2027, report date for the quarterly form.

Follow this and other critical developments on Latham’s US Crypto Policy Tracker.

  1. Under the GENIUS Act (12 U.S.C. 5901 et seq.) and the Final Rule, a “payment stablecoin” is a digital asset (i) that is, or is designed to be, used as a means of payment or settlement and (ii) the issuer of which (a) is obligated to convert, redeem, or repurchase it for a fixed amount of monetary value, not including a digital asset denominated in a fixed amount of monetary value, and (b) represents that such issuer will maintain, or creates the reasonable expectation that it will maintain, a stable value relative to the value of a fixed amount of monetary value. The term does not include a digital asset that is (i) a national currency; (ii) a deposit, including a deposit recorded using distributed ledger technology; or (iii) a security as defined in the Securities Act of 1933, the Securities Exchange Act of 1934, or the Investment Company Act of 1940. ↩︎
  2. The Final Rule, like the Proposal, does not define the terms “interest,” “yield,” “pay,” “holding,” “use,” or “retention,” with the OCC reasoning that definitions could encourage arrangements designed to evade the prohibition. ↩︎
  3. Section 10 of the GENIUS Act (12 U.S.C. 5909) governs custody of payment stablecoin reserves, requiring custodians to be federally or state supervised, treat custodied assets as customer property, and keep them segregated. It also gives payment stablecoin holders’ claims priority in a custodian’s insolvency. ↩︎