Author: Jean-Paul Faraj, Source: Bankless, Translated by: Shaw & Jinse Finance
Washington has been embroiled in a seemingly trivial but actually quite contentious debate: Should holders of digital dollars receive interest?
Banks say no, while cryptocurrency companies are outright in favor. The White House attempted to convene talks in February, but failed. Now, federal banking regulators are trying to resolve the issue through executive order.
The stakes are far higher than they seem. Currently, the returns on stablecoins pegged to the dollar and backed by Treasury bonds largely accrue to their issuers. This battle is about whether you get a share, and its outcome will determine where trillions of dollars in cash-like savings ultimately end up.
How We Got Here
Congress believes they have handled this matter properly.
The GENIUS Act, which came into effect on July 18, 2025, created a framework for "payment stablecoins"—tokens designed to function like digital cash rather than savings accounts. The logic is simple: **If something looks like a deposit, and the returns look like a deposit, then it should be regulated like a deposit.** Therefore, the Act prohibits stablecoin issuers from paying "interest or returns" to holders solely for holding tokens.
The market almost immediately spotted the loopholes.
If issuers can't pay interest, what about partner platforms? Affiliates? "Rewards programs" that operate on a revenue-sharing basis?
None of these are explicitly prohibited, thus an ecosystem centered around profit sharing has begun to form, with cryptocurrency companies marketing competitive "rewards" to stablecoin holders through carefully designed, legally compliant mechanisms. Banks have noticed this, and they are unhappy. The Office of the Comptroller of the Currency (OCC) has intervened. Recently, the OCC proposed new implementing rules for the GENIUS Act, aiming to close this loophole. The core measure is a rebuttable presumption: If a stablecoin issuer enters into an agreement with a related party to pay them profits, and that related party then enters into an agreement with holders to pay them profits, the OCC will directly deem the entire arrangement prohibited interest—unless the issuer can submit written evidence sufficient to refute this presumption. The "related third parties" referred to by the OCC include companies that "provide services" on behalf of the issuer and pay returns to holders, as well as white-label partners of the issuer that issue tokens under other brands. In other words, the regulator is making it clear: we see what you are doing and will point it out. However, the OCC states that it does not intend to stifle business activity. Merchants can still independently offer discounts for payments made with stablecoins. Issuers can still share profits with unaffiliated white-label partners, as long as these profits are not passed on to end users in the form of returns. Its goal is clear and specific: **idle income simply from holding tokens**. If rewards can be earned simply by holding tokens, the OCC wants to treat them as interest, regardless of how many layers of companies the reward ultimately passes through to the holder. Why are banks concerned? Banks see this as a risk of capital outflow. If consumers can hold something that feels like a dollar, spends like a dollar, and pays competitive interest rates, this directly challenges the deposit base that funds traditional lending. They argue (or at least assert) that deposits may no longer circulate in the banking system as they have in recent decades, creating systemic risk. The OCC proposal openly acknowledges this, noting that issuers may enter into “a variety of evolving arrangements” with third parties to indirectly realize returns. This is why the OCC proposes a presumption framework, rather than attempting to list every possible circumvention method. The crypto industry's counterargument is simple: **returns exist.** Stablecoin reserves are invested in cash and government bonds, so the risk-free rate already exists, only accessed by issuers and intermediaries, not users. Blocking rewards programs doesn't make returns disappear; it only determines where they go. This argument is difficult to refute. However, the OCC proposal encountered greater resistance after its release. "Rewards" can now be considered "yields," regardless of their structure, which changes the model for all platforms that had previously been quietly building such projects. One of the most important parts of this framework is unrelated to interest. Under the GENIUS Act currently being implemented by the OCC, foreign stablecoin issuers face stringent sustainability conditions, including holding sufficient reserves in U.S. financial institutions to meet the liquidity needs of U.S. customers, and meeting reporting and access requirements that offshore models cannot handle. More importantly, time is of the essence. From July 18, 2028, digital asset service providers will be prohibited from offering or selling payment stablecoins in the United States unless the issuer obtains permission under the GENIUS Act or meets the qualifications of an approved foreign issuer. For players like Tether, which have long operated overseas and have consistently resisted the transparency now demanded by US regulators, this is a deadline to either comply or exit the market. Two and a half years is not enough time. The most likely outcome: Before the OCC proposes a solution, there are three viable paths forward. A complete ban, meaning payment stablecoins will no longer receive any yield-based rewards. Rewards allowed, but with strict reserve standards and disclosure requirements. Keeping payment stablecoins non-yielding, but allowing yields to exist in a separate package explicitly labeled "digital savings," similar to a tokenized money market fund. The OCC's proposal has effectively pushed the first option towards the regulatory default, at least for idle yields transferred through affiliated institutions. Paradoxically, this makes the third option more likely to emerge in practice. If you cannot obtain yields by holding digital cash, the yields do not disappear but are transferred to a separate package that can be legally linked to Treasury yields. In summary, beyond the complexities, the essence of this struggle is: Who can obtain yields from the US's digital dollar? If stablecoins remain only at the payment level, the stability of bank deposits will be maintained, and risk-free interest rates will still be transmitted through traditional channels. However, if stablecoins transform into savings instruments, or if reward mechanisms effectively enable them to function as savings, Treasury yields will directly benefit users, and the focus of cash management will undergo an unprecedented shift in the banking system in recent decades. The White House attempted to broker an agreement in February but failed. Now, the OCC is trying to break the deadlock by default deeming "interest-like rewards" illegal. Whether this policy can be maintained in the courts, Congress, or the next round of rulemaking will determine the ultimate fate of the digital dollar in the United States.