OCC’s GENIUS Act Proposal: What Prospective Issuers Need to Know

SCOPE OF THE OCC’S PROPOSAL

The Office of the Comptroller of the Currency’s (OCC’s) March 2026 proposal was the most comprehensive of the GENIUS Act (the Act) proposals, which is appropriate given that the Act gives the OCC authority to license the broadest set of entities to issue payment stablecoins. The OCC’s proposal applies to national banks and federal savings associations that want to issue a payment stablecoin through a subsidiary, uninsured national banks (often referred to as national trust banks), non-bank issuers, federal branches of a foreign bank, and large state issuers.

The proposal defines the activities of a Permitted Payment Stablecoin Issuers (PPSI), the regulatory rules implementing the prohibition on paying yield solely for holding a payment stablecoin, the reserve assets that the issuer must hold to fully back the value of the stablecoin, the rules governing custody, the capital to be held by PPSIs, and various requirements governing reporting, audit, and examination of PPSIs.

ACTIVITIES AND YIELD

Activities

The OCC’s proposed list of permitted activities of a PPSI generally mirrors that in the GENIUS Act itself, with the following additional supporting activities:

• Issuing payment stablecoins
• Redeeming payment stablecoins
• Managing reserves related to the issuance or redemption of payment stablecoins, including purchasing, selling, and holding reserve assets or providing custodial services for reserve assets, consistent with applicable law
• Providing custodial or safekeeping services for payment stablecoins, required reserves, or private keys of stablecoins
• Assessing purchase and redemption fees
• Acting as principal or agent with respect to payment stablecoins
• Paying network fees to facilitate customer transactions

Consistent with the GENIUS Act’s prohibitions, the proposed rule would not permit a payment stablecoin issuer to

• use a deceptive name that includes terms related to the US government (but an issuer can use the term USD), market a payment stablecoin in such a way that it could be perceived to be legal tender or guaranteed or approved by the US, or represent directly or by implication that the payment stablecoin is backed, guaranteed, or insured by the US government; or
• pledge, rehypothecate, or reuse reserve assets, including through a third-party custodian, except to
  • satisfy margin obligations in connection with investments in permitted reserves;
  • To satisfy obligations associated with the use, receipt, or provision of standard custodial services; or
  • create liquidity to meet redemption requests by entering into repurchase agreements on treasuries with a maturity of 93 days or less (provided such repos are either centrally cleared or receive prior OCC approval).

The OCC’s proposal contains a rule of construction that a depository institution, national bank, or trust company may still engage in other activities permissible under state and federal law.

Yield

Consistent with the text of the GENIUS Act, the OCC’s proposal prohibits PPSIs from paying interest or yield to holders of payment stablecoin.[1] The proposal first reiterates the GENIUS Act prohibition that issuers cannot pay “any form” of interest or yield, including “in cash, tokens, or other consideration.” This statutory prohibition covers payments “solely in connection with the holding, use or retention of such payment stablecoin.”

The OCC’s proposal goes further. It creates a presumption that a PPSI is paying impermissible interest or yield to a holder of a payment stablecoin if it contracts to pay the holder yield through affiliates or third parties and explains that the PPSI could rebut this presumption by explaining to the OCC in writing how, in the OCC’s judgment, an identified arrangement is not an attempt to evade the prohibition.[2]

The Preamble goes on to clarify that other arrangements might also be treated as a violation of the interest prohibition; the third-party presumption is not the exclusive arrangement that would give rise to a violation. Such other arrangements would be assessed by the OCC on a case-by-case basis. The preamble clarifies that certain other conduct is not intended to be prohibited under this provision, including

• merchants independently offering discounts to holders for using payment stablecoins; and
• white-label arrangements under which PPSIs share in the profits derived from issuing a payment stablecoin with a non-affiliate partner.

The OCC’ s proposal potentially sets up a conflict with a compromise being debated in Congress as part of a future digital asset market structure bill (the Digital Asset Market Clarity Act). While the draft of the bill introduced in January mirrors the GENIUS Act’s prohibition and further restricts yield payments by applying the prohibition to digital asset service providers (Section 404(b)(1) of the January draft), that effort has drawn opposition from the digital asset industry, contributing to the stalemate for passage of the bill. Such a compromise may then result in necessary changes to the OCC GENIUS Act rulemaking if and when it becomes final.

RESERVE REQUIREMENTS

Reserve Assets

The OCC proposal would require payment stablecoin issuers to maintain identifiable, segregated reserves that always have a fair value at least equal to the outstanding issuance value of the payment stablecoins. Reserves would be held directly by the PPSI or placed with a custodian that qualifies as an eligible financial institution. PPSIs would also be required to demonstrate the operational capability to access and monetize reserves rapidly.

The permitted reserve assets include the following:

• Physical cash or balances at a Federal Reserve Bank
• Demand deposits or insured shares of an insured depository institution
• US treasuries with a maturity of 93 days or less
• Money received under repurchase agreements as seller, backed by US treasuries with a maturity of 93 days or less
• Certain overnight reverse repurchase agreements meeting strict terms
• Certain government money market funds invested solely in the above eligible assets
• Other liquid federal assets as approved by the OCC
• Certain tokenized forms of the above assets

The GENIUS Act requires the OCC to issue regulations regarding asset diversification. The OCC proposes the following two alternatives (only one of which would be adopted):

• Option A: A principles-based provision requiring a PPSI to maintain reserve assets “that are sufficiently diverse to manage potential credit, liquidity, interest rate, and price risks,” with an optional quantitative safe harbor
• Option B: Mandatory quantitative requirements

The safe harbor under Option A and the mandatory quantitative provision under Option B are as follows:

Insured Deposit Requirement for Large PPSIs

The OCC is also proposing that PPSIs with at least $25 billion in outstanding issuance value hold at least 0.5% of reserves as insured deposits or insured shares each business day, but capped at $500 million. The $500 million cap would apply to institutions with $100 billion or more in outstanding issuance value. Given the statutory maximum deposit insurance amount of $250,000, a PPSI at the $500 million cap would be required to maintain insured deposits at 2,000 different institutions.

As of year-end 2025, there were more than 4,300 insured depository institutions in the United States. This proposed requirement could prove difficult for issuers to meet and would almost certainly require the use of deposit brokers. It is not clear whether there is sufficient operational capacity or appetite from depository institutions to set up the number of deposit accounts that this may require.

Reporting and Penalties

The OCC would require a PPSI to submit a monthly public reserve composition report, examined by a registered public accounting firm, and with a CEO and CFO attestation.

If a PPSI is unable to comply with the minimum reserve requirements, the proposal provides that the PPSI would be barred from issuing new payment stablecoins until it has remediated the issue (except as needed to facilitate transfers).

If a PPSI is unable to meet reserve requirements for 15 consecutive business days, it must begin liquidation of reserve assets and redemption of outstanding payment stablecoins and may not charge a redemption fee to the stablecoin holder.

REDEMPTION

The OCC proposal would provide a maximum of two business days for fulfilling redemption requests from customers. Discretionary limitations on this redemption period could be imposed by the OCC (and for state issuers, the OCC, Federal Reserve, or relevant state regulator).

The proposed rule also provides that if redemption requests exceed 10% of outstanding issuance value in any 24‑hour period, the redemption period automatically and mandatorily extends to seven calendar days for all pending and subsequent requests, unless the OCC permits earlier orderly redemption. When this occurs, the PPSI must notify the OCC within 24 hours.

The proposed rule would require a PPSI to publicly disclose its redemption policy and provide the following information:

• The timeframe for redemption;
• A statement that discretionary limitations on the redemption period may only be imposed by the OCC (and for state issuers, the OCC, Federal Reserve, or relevant state regulator);
• The scenarios in which a redemption period may be extended (i.e., the seven calendar day period for redemptions where redemption requests exceed 10% of outstanding issuance value in any 24-hour period);
• Clear instructions on how a payment stablecoin holder can redeem a payment stablecoin, including a link to the relevant website;
• Minimum number of payment stablecoins the PPSI will redeem, which must be at least one payment stablecoin (i.e., the PPSI can choose not to accept fractional redemptions of a single payment stablecoin); and
• Fees associated with redemption.

CUSTODY AND REPORTING

Custody Requirements

Subpart C of the OCC’s proposal requires any person seeking to provide custodial or safekeeping services for payment stablecoin reserve assets, payment stablecoins used as collateral, or private keys (defined as “covered assets,” and the person seeking to provide custodial services as the “covered custodian”) to:

• Treat covered assets as belonging to the customer, not the custodian;
• Adopt written policies, procedures, and internal controls commensurate with size, complexity, risk, and asset type to protect against custodian or sub-custodian creditor claims; and
• Separately account for the covered assets and not commingle them with proprietary assets (except to the extent a bank is the custodian of covered assets in the form of cash, in which case the bank may treat the cash as a deposit liability).

Only a national bank, federal savings association, federal branch of a foreign bank, or PPSI may serve as a covered custodian. However, the proposed rule would permit a covered custodian to use one or more sub-custodians (which do not have to be one of the foregoing entities) if consistent with applicable law and adequate safeguards and internal controls for oversight are followed.

In addition, the proposal specifically permits a covered custodian to hold covered assets in an omnibus account, so long as the covered custodian has taken adequate steps to maintain safe and sound practices for the use of such accounts and to the extent the use of omnibus accounts is consistent with applicable law. A covered custodian would also be permitted to withdraw covered assets as necessary for transfers, transaction settlements, adjustments, and payments in connection with its provision of services, all as consistent with applicable law.

Reporting Requirements

The GENIUS Act requires a covered custodian to submit certain information to the OCC in the “form and manner as [the OCC] shall determine.” For covered custodians that are national banks, federal savings associations, and federal branches, the OCC is proposing to rely on the reporting information that such institutions currently submit on Schedule RC-T of the Call Report, which is the schedule relating to an entity’s custodial business. For non-bank PPSIs acting as covered custodians, the OCC is proposing to rely on those entities’ quarterly report of financial condition in proposed Section 15.14.

The OCC is seeking comment on whether reliance on Schedule RC-T for certain covered custodians is appropriate, given that Schedule RC-T does not provide a breakdown of specific assets in custody and may not be applicable to those custodians that do not also provide fiduciary services. The OCC is considering a separate reporting form that would require a covered custodian to provide more detailed information on covered assets in custody.

CAPITAL AND LIQUIDITY

Capital Requirements

The GENIUS Act requires the OCC to establish capital requirements for PPSIs. The OCC is proposing to impose capital requirements that primarily focus on a PPSI’s operational risk rather than credit, market, interest rate, and other forms of financial risk that bank regulatory capital requirements address. The OCC would impose PPSI capital requirements on a case-by-case basis at licensing, using factors such as financial projections, expenses, products and services proposed, and discussions with organizers. This process would be similar to that used to determine capital requirements for national trust banks.

The OCC is proposing an initial capital floor of $5 million that would last for a three-year “de novo period,” which could be changed at the OCC’s discretion. Following this de novo period, the OCC would impose an ongoing capital requirement based on the OCC’s evaluation of the PPSI’s risk. The OCC has not proposed a particular floor for these ongoing capital requirements.

The OCC is seeking comment on the following alternative approaches:

• A capital requirement based on a percentage of outstanding issuance value, which could account for the operational risk that may arise as the size of the issuance value and corresponding reserve assets increase;
• A capital requirement that accounts for price and interest rate risk of reserve assets, e.g., by requiring the PPSI to apply bank regulatory capital “haircuts” to assets such as reverse repurchase agreements and treasuries;
• A capital requirement that accounts for credit risk of reserve assets, in particular uninsured bank deposits, reverse repurchase agreements, and money market funds; and
• For those PPSIs that provide custody services, a capital requirement based on the fair market value of assets held in custody.

Operational Backstop

In addition, the OCC is proposing that a PPSI hold a designated pool of highly liquid assets as an operational backstop to maintain ongoing operations during a business disruption. Separate from the proposed de novo and ongoing capital requirements, this operational backstop would allow a PPSI to meet short-term liquidity needs and stabilize operations during a potential disruption.

The backstop would be based on the actual total expenses of the PPSI over the past 12 months and would be held in readily available liquid assets (i.e., currency or balances held at a Federal Reserve Bank) as a fully insured demand deposit at a US-insured depository institution, or in certain US treasuries. The operational backstop assets may not be the same as reserve assets or any other assets of the PPSI.

PPSI Deficiencies

If a PPSI’s capital or operational backstop are deficient at quarter end, the PPSI may not issue any new stablecoins until the deficiency is cured. Two consecutive deficiencies would trigger mandatory redemption of stablecoins without fees to the stablecoin holder and liquidation of reserve assets.

Other Capital Issues and Proposed Amendments

The OCC is also proposing to amend the bank regulatory capital rules to require a national bank or federal savings association that consolidates a PPSI under generally accepted accounting principles (GAAP) to deconsolidate the PPSI for regulatory capital purposes. This would mean the national bank would not itself be required to take the PPSI into account when calculating its regulatory capital requirements.

It appears the intent is to have the PPSI capitalized as if it were a standalone entity; however, if a national bank is itself a subsidiary of a bank holding company, parallel changes to the Federal Reserve’s capital rules applicable to bank holding companies would be required to ensure the bank holding company itself does not have to hold capital against the PPSI’s assets.

The OCC is proposing to permit an uninsured national trust bank that issues a payment stablecoin directly to opt out of the full bank regulatory capital requirements under Part 3 of the OCC’s rules and instead permit it to comply only with the capital requirements applicable to PPSIs.

RISK MANAGEMENT, SUPERVISION, REPORTING, AND AUDIT

The OCC’s proposal seeks to apply much of the framework and tools of bank regulation to this new set of financial market participants. Indeed, many of the questions in the proposal focus on which bank regulatory concepts should be applied to payment stablecoin issuers and whether more such concepts should be added than are included in the proposed rule.

The OCC proposes imposing on PPSIs principles-based operational and risk management standards and a structure for information technology and security. See § 15.13. It also proposes standards for examination frequency, reporting, audits, and changes to ownership control. See § 15.14.

Risk Management and Technology Standards

The proposed risk management for PPSIs include the following:

• General standards covering internal controls and information systems, including segregation of duties and clear lines of authority, effective risk assessment, and adequate procedures to protect and monetize assets, including reserve assets. See § 15.13(a)(1)
• Internal audit systems requiring independence and objectivity of internal audit; adequate testing of internal controls, calculation of reserve assets, and information published to customers; documentation; and review by management and either the audit committee or the board. See § 15.13(a)(2)
• Interest rate exposure requiring interest rate risk management appropriate to the size and complexity of payment stablecoin issuers and periodic reporting to the issuer’s board with sufficient information to allow the board to assess the level of risk. Note, the OCC emphasized the importance of interest rate risk given the role such risk played in the prior failures of money market mutual funds. See § 15.13(a)(3) and p. 75
• Asset growth consistent with the risk management and operational capacity of the payment stablecoin issuer
• Earnings sufficient to support operations and capital levels
• Insider and affiliate transactions mirroring concepts found in 12 CFR Part 215 (Regulation O), the proposal requires that such transactions not pose significant financial risk, be documented, and be offered on terms not more favorable than would be offered a non-insider. § 15.13(a)(6)
• Oversight of service providers: Citing its third-party risk management guidance, the OCC’s proposal would require payment stablecoin issuers to exercise due diligence over third-party service providers and engage in ongoing monitoring in a manner similar to the expectation already placed on banks. § 15.13(a)(7) and p. 77
• Liquidity diversification and concentration requiring appropriate monitoring of liquidity and concentration risk

The above standards, without baking in asset or trade volume thresholds, require payment stablecoin issuers to maintain risk management appropriate to the issuer’s business model, risks, size, and complexity.

The proposed information technology and security standards for PPSIs require the following:

• A comprehensive written program approved by the payment stablecoin issuer’s board of directors. See § 15.13(b)(1)&(2)
• A program that includes an inventory of assets, processes, and data; controls for safeguarding sensitive information and processes; controls to ensure that information systems and controls are operating as intended; independent testing; and an effective incident identification and response program. See § 15.13(b)(3)
• Safeguards to protect the confidentiality of a customer’s nonpublic personal information, to protect against threats to the security or integrity of such records, to protect against unauthorized access or use, and to ensure proper disposal of such records. See § 15.13(b)(4)
• Safe handling of digital assets, including private keys, backups, and recovery, and incorporate material technological developments in the digital assets and their underlying ledgers. See § 15.13(b)(5)
• Notification of customers or a group of customers if there has been unauthorized access of their information, including their private keys. See § 15.13(b)(7)

The information and technology standards also require a payment stablecoin issuer to review and adjust the program in response to changes, including changes to technology and internal and external threats.

Supervision, Reporting, and Audit

Supervision and examination: The OCC’s proposal creates a supervision and examination regime that resembles much of the existing bank examination regime, but with notable differences. It creates a default of a 12-month exam cycle, see § 15.14(a), but allows for less frequent exams if the payment stablecoin issuer is below certain thresholds and doesn’t present other risks. Not presenting other risks per the proposal means the issuer is in compliance with reserve requirements, is not subject to an enforcement action, and no person has acquired control of the issuer in the last 12 months. See § 15.14(a).

The OCC also reserves the right to examine more frequently. Notably, the proposal implies the OCC will view its access to books and records as unhindered even for documents over which a payment stablecoin issuer claims privilege, setting up for issuers challenges similar to the ones banks currently face when interacting with their federal banking regulator.^[3]

Mirroring the statue, the proposal provides language that signals an interest in flexibility and efficiency in examination. It explicitly provides for the OCC to conduct exams remotely, to use existing reports “to the fullest extent possible,” and to avoid duplication of exam activities and other requests. See § 15.13(c), (n), & (o). Note, these statements are aspirational and may not in practice restrict the conduct of future examiners.

Reporting: The reporting regime contemplated by the proposal is substantial and asks for more frequent reporting than is applicable to banks. In addition to the monthly reporting of its reserves to its public website, each payment stablecoin issuer would be required to make a weekly confidential report to the OCC related to issuance and redemption, trading volume, and reserve assets. The issuers would also make a quarterly public filing similar to a bank Call Report, see § 15.13(c), p. 86, and make other reports when requested by the OCC related to financial condition, control systems, legal compliance, and Bank Secrecy Act and sanctions compliance.

Audit: The proposal would require payment stablecoin issuers with more than $50 billion in outstanding stablecoin issuances to receive an annual GAAP-compliant audit from a registered public accounting firm. That audit would be published to the issuer’s website and provided to the OCC. Firms already subject to the reporting requirements of the Securities and Exchange Act of 1934 would be exempt from this requirement.

OCC SUPERVISION OF STATE-QUALIFIED STABLECOIN ISSUERS

The GENIUS Act authorizes states to license and regulate nonbank payment stablecoin issuers with little federal oversight, as long as the state-licensed issuer remains below $10 billion in outstanding issuance. The Act also requires that state payment stablecoin issuers transition to federal oversight or seek a waiver of federal oversight when stablecoin issuance exceeds that $10 billion threshold.

The OCC’s proposal sets the process by which a state issuer must notify the OCC of it exceeding the $10 billion threshold, come into compliance with federal standards, or cease issuing net new payment stablecoins until it comes below the $10 billion threshold. See § 15.15(b). The issuer can seek a waiver of OCC oversight, and the proposal provides the standards by which the OCC will consider such a request, including a presumption that benefits states that had a prudential regulatory regime covering digital assets or stablecoins in place prior to April 19, 2025. See § 15.15(d).

The OCC retains emergency enforcement authority over state-regulated non-bank issuers. The OCC can impose a directive on a non-bank state-qualified payment stablecoin issuer if the OCC has reason to believe that an issuer’s activity or failure to act constitutes a serious risk to the financial safety, soundness, or stability of the issuer. See § 15.16.

Note, this GENIUS Act structure giving the OCC some level of backup enforcement authority over state-licensed stablecoin issuers will necessarily create a new relationship between the OCC and state regulators, New York and Wyoming being among the most notable in this space, with Delaware also trying to make headway.

Unlike the FDIC or the Federal Reserve Board (FRB) with their shared exams and coordinated enforcement actions with state regulators, the OCC does not have the same experience of ongoing coordination with state regulators. There will likely be a learning curve for these intergovernmental relationships, and this area could be a source of friction.

ENFORCEMENT UNDER THE OCC’S GENIUS ACT PROPOSAL

The GENIUS Act places real teeth behind its enforcement, creating a number of criminal offenses for violation of the Act^[4] and new civil penalties. The federal banking agencies in their role as payment stablecoin regulators, the NCUA, and Treasury have responsibility for civil enforcement of the Act. The OCC’s proposal doesn’t substantively alter or add to the enforcement schema of the Act as found in 12 USC 5905(b).

Instead, it modifies the OCC’s existing rules of practice governing enforcement proceedings[5] and applies them to any enforcement actions it would bring against payment stablecoin issuers. It is notable that the types of challenges brought and defenses raised by respondents in banking enforcement actions would be similarly available to payment stablecoin issuers under the GENIUS Act enforcement structure and the OCC’s proposed regulations.

COMMENTS AND TAKEAWAYS

Areas for Comment

The OCC asked over 200 questions in the proposed rule, indicating it is receptive to feedback and willing to make changes in the final rule. Commenters should consider the following issues:

• Whether the principles-based reserve asset diversification option (with quantitative safe harbor) or the mandatory quantitative requirement is more appropriate, and whether the quantitative requirements should be modified (Question 57)
• Whether the requirement for large PPSIs to hold a certain percentage of reserve assets in insured deposits/insured shares should be set at different levels (Question 63)
• Whether a 2-business-day maximum redemption period is appropriate (Question 100)
• Whether a $5 million minimum capital requirement for de novo PPSIs is appropriate (Question 180)
• Whether an alternative capital requirement standard (e.g., based on percentage of outstanding issuance value, price and interest rate risk of reserve assets, credit risk of reserve assets, or fair market value of assets held in custody) is more appropriate than the proposed case-by-case discretionary standard (Questions 182 and 183)

Takeaways

• Takeaway for prospective issuers: The OCC’s regulatory expectations for PPSIs are substantial and will mirror much of how the federal banking agencies function with respect to banks. Meaning even though the proposed regime is different from what applies to banks, PPSIs should expect the rigor of a bank-like supervisory regime.
• Takeaway for third-party fintechs: Under the OCC proposal, working with a payment stablecoin issuer will be much like working with a bank. The OCC is considering imposing third-party risk management standards on payment stablecoin issuers that are similar to the standards in place for banks. The OCC has signaled it will incorporate PPSIs into future updates to the guidance.