OCC aligns with CEI suggestions in new stablecoin rule

Last week, the Office of the Comptroller of the Currency (OCC) released its long-awaited final rule implementing the GENIUS (Guiding and Establishing National Innovation for US Stablecoins) Act. In designing the regulatory framework for payment stablecoins, the OCC incorporated many policies that align with recommendations from CEI’s comments on the proposed rule.

In comments that I filed in May on behalf of CEI, I urged the OCC to “ensure that this implementation minimizes harmful red tape and does not exceed what the law requires.”

Stablecoins, as I wrote in the comments, “are electronic tokens pegged to a stable value of units of assets or currencies. Initially created as a mechanism to ease the trading of cryptocurrencies such as Bitcoin, stablecoins now top $300 billion in market value and have become an essential tool in distributing the U.S. dollar worldwide.” I explained that “these facts motivated Congress last year to enact the GENIUS Act to create legal certainty for a certain subset of stablecoins the law deems as ‘payment stablecoins.’”

In the comments, I advised the OCC to stay away from using the rule, as some cryptocurrency critics were suggesting, to “govern market structure for the entire cryptocurrency industry.” I noted the changed legal landscape since the 2024 Supreme Court case of Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244, in which “the Court jettisoned the ‘Chevron deference’ precedent that largely defers to regulatory agencies’ interpretation of the powers granted to them by law.” The comments urged the OCC to “exercise restraint before foisting costly regulations that may lack adequate data and may also exceed the law.”

The OCC final rule largely aligns with CEI’s advice. On the issue of whether cryptocurrency exchanges may pay customers interest or rewards on their stablecoin balances, the OCC notes correctly that the law does not prohibit exchanges from doing so, and that therefore the rule would not be imposing such a ban. In an absurd attempt to stretch the GENIUS Act’s restrictions, some bank lobbyists had argued that since the law banned stablecoin issuers from paying interest or “yield,” no one else should be able to offer it to consumers as well.

The OCC rightly rejected this policy action which, in addition to contradicting the underlying law, would have limited opportunities for American savers to build wealth by offering an option for higher interest rates than bank deposits. When bank lobbyists pushed for these restrictions to be explicitly written into the CLARITY Act cryptocurrency market structure legislation, which now appears to have died in the Senate, CEI joined a coalition letter with Club for Growth, 60 Plus Association, and others opposing such a move. The letter noted that “consumer rewards … are legitimate, pro-competitive features of modern commerce — evidence of how open markets drive value to consumers.” The letter noted that signatories also opposed regulatory barriers that would have inhibited rewards from banks — in the case of price controls on credit and debit card interchange fees — and consistently advocated the same position for cryptocurrency and fintech firms.

The new OCC rule also aligns with CEI’s advice not to impose a “one brand” mandate that would prohibit stablecoin issuers from producing stablecoins for different firms under different names. I noted in the comments that such arrangements, often described as “white label,” are common in many types of markets and beneficial to consumers.

“This is a common practice among various industries, including supermarkets that contract with manufacturers to produce private label food and drink brands,” I wrote. “By increasing the number of brands in a given market, white label arrangements increase competition to the benefit of consumers.”

I noted in the comments that white-label arrangements would likely have similar benefits in stablecoin markets. “Fintech startups and community banks that don’t have the resources to produce payment stablecoins on their own could rely on issuers and market these stablecoins under their firms’ names to their customers,” I explained. White-label arrangements could also lead to wider adoption by creating branded stablecoins through well-known retailers and tech companies that may wish to partner with stablecoin issuers.

The main reason to forgo a “one brand” mandate, I argued in the comments, was that Congress did not authorize it in the GENIUS Act. I noted that the only provision in the legislation the OCC cited as authority for potentially banning white-label arrangements was language allowing it to “carry out the requirements” of the law “and to prevent evasion thereof.” I explained that issuing such a mandate under this language would be “problematic,” because “the authority to ‘carry out the requirements’ of a statute and prevent evasion does not authorize the creation of new substantive market restrictions absent clear congressional direction.”

In the new rule, the OCC took this advice from CEI and other commenters, abandoning plans for a one-brand mandate. In its “supplementary information” section issued with the rule, the OCC states:

The OCC acknowledges that such a restriction would … impose burden and is not clearly mandated by the statute. By not implementing such a requirement, the OCC is being responsive to the vast majority of commenters that stated that such a requirement would increase regulatory burden on permitted payment stablecoin issuers.

CEI Research Associate Avery Schreck recently wrote here that “the growth of stablecoins demonstrates that digital payment innovation does not have to originate with the government.” The OCC’s reasonable rule, which adheres to the law Congress has written, creates a regulatory atmosphere conducive to driving the continued growth of this beneficial private-sector innovation.