OCC Finalizes GENIUS Act Rules, Effective January 2027

Article by KarenZ, Foresight News

On October 21, 2026, the U.S. Office of the Comptroller of the Currency (OCC) published the final rule implementing the GENIUS Act, confirming that the final rule will take effect on January 18, 2027. For companies seeking to issue stablecoins in the United States, licensing, reserve, redemption, and capital requirements have now entered a defined implementation phase.

The final version presents a balanced arrangement: greater flexibility in reserve allocation, continued application of capital floors, elimination of automatic deferrals for large redemptions, and removal of presumptions of noncompliance for certain third-party revenue arrangements. How these changes will affect competition between bank-backed issuers and crypto-native companies, as well as the compliance pathways of USDC, Open USD, and USDT, are questions worth tracking after the rules take effect.

U.S. Treasury Secretary Scott Bessent stated that, just as the National Currency Act of 1863 established a national framework for banks to issue currency, the GENIUS Act creates a federal regulatory framework for payment stablecoins in the digital age.

First, it’s important to clarify that the GENIUS Act was not implemented overnight—it is the Guiding and Establishing National Innovation for U.S. Stablecoins Act, passed by the U.S. Congress in 2025 and signed into law by the President on July 18, 2025. The OCC’s recent release consists of the implementing rules authorized by this Act, applicable to issuers and certain related custody activities under its regulatory jurisdiction. Additional requirements related to the Bank Secrecy Act, anti-money laundering, and sanctions will be established separately by the OCC in coordination with the Treasury Department.

OCC stated that this rulemaking received hundreds of comments from cryptocurrency companies, community banks, industry organizations, and academia.

The most important change for the industry is that regulation is evolving from legal frameworks and principle-based requirements toward specific application, reporting, and oversight processes.

Who can issue stablecoins is now subject to clearer entry requirements.

One of the core provisions of the GENIUS Act is the establishment of an approved payment stablecoin issuer regime. Effective upon enactment, issuing payment stablecoins in the United States must, in principle, be done by an approved payment stablecoin issuer.

The OCC regulates entities including national banks and their related subsidiaries, federally qualified payment stablecoin issuers, certain state-qualified issuers, and foreign issuers that meet applicable criteria. Other issuers may be regulated by the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), or state regulators, depending on the nature of the institution and its statutory regulatory authority.

The key issue at hand is the application transition. As of October 22, the OCC has not yet opened applications, as it is still awaiting approval from the U.S. Office of Management and Budget (OMB) for the information collection on the application form. According to OCC guidance, issuers that are eligible and have a substantially complete application pending as of January 18, 2027, may apply to the OCC for a waiver of up to 12 months. The waiver is not automatic; the OCC will review each case individually. Currently, regulators anticipate primarily considering waivers of the prior approval requirement for issuers whose applications are still under review, to minimize business disruptions caused by the new rule taking effect before applications are approved.

Reserves, Redemption, and Reporting: Turning the "$1 Promise" into an Auditable System

The GENIUS Act requires payment stablecoin issuers to maintain identifiable reserves of at least a 1:1 ratio and limits eligible reserves to cash, qualifying deposits, short-term U.S. Treasury securities, and other assets permitted by the Act. Payment stablecoins are not equivalent to bank deposits; holders do not have federal deposit insurance simply by virtue of holding stablecoins.

The OCC's final rule further clarifies operational requirements for timely redemptions and sets the standard redemption timeframe at no more than two business days. The specific start time, necessary customer verification conditions, and when a redemption is considered complete shall be determined in accordance with the relevant provisions of the final rule and the issuer’s publicly disclosed redemption policy.

The reporting requirements have also been further refined. The OCC also proposes requiring relevant issuers to submit weekly reports on stablecoin activity and reserves, as well as quarterly financial condition and income reports. The revised forms are still under public comment and pending OMB approval; if approved, the reporting requirements are intended to take effect on January 25, 2027, for weekly reports and March 31, 2027, for quarterly reports.

This compares the OCC draft with the final version. The relevant adjustments primarily include the following four items:

First, retain the issuer's profit prohibition and remove the "rebuttable presumption" for certain third-party arrangements.

The GENIUS Act prohibits approved payment stablecoin issuers and foreign payment stablecoin issuers meeting relevant statutory conditions from paying any form of interest or yield—whether in cash, tokens, or other consideration—to holders solely on the basis of holding, using, or retaining payment stablecoins. The OCC’s final rule maintains this prohibition and does not permit issuers to pay interest directly to holders for these reasons.

The draft previously established a "rebuttable presumption" for related-party and third-party profit arrangements meeting specific criteria: initially presuming a violation of the prohibition, then allowing the issuer to submit materials to rebut it. The final version removed this mechanism and instead requires the OCC to review specific arrangements during application evaluation and ongoing supervision, taking action against transactions that violate or attempt to circumvent the prohibition.

Changing the payment party does not automatically circumvent the ban. The OCC explicitly states that paying interest or returns solely because a holder owns, uses, or holds a stablecoin, when the agent acts on behalf of the issuer, remains prohibited. Other third-party reward arrangements must be evaluated based on the actual payment relationship and the reason for payment.

Second, reserve arrangements are more flexible.

The OCC draft proposed two alternative approaches. Approach A is principle-based, requiring issuers to diversify reserves and manage concentration risk, while offering a voluntary quantitative "safe harbor": meeting all safe harbor conditions is deemed compliant with the requirement; issuers that do not opt for the safe harbor must still satisfy the principle-based requirements. Approach B directly makes the quantitative metrics from Approach A’s safe harbor mandatory. Both approaches include the same quantitative parameters: at least 10% in designated immediately available funds, at least 30% in five-business-day liquidity, and a weighted average maturity of the reserve portfolio not exceeding 20 days.

The final version combines both approaches: retaining the principle requirements of Option A while incorporating adjusted mandatory metrics, setting a minimum threshold of 5% for immediately available funds, removing the five-day liquidity and 20-day weighted average maturity metrics, and adding stress testing along with requirements to hold additional reserve buffers when necessary. As a result, issuers gain greater flexibility in allocation, but meeting the 5% threshold does not constitute full compliance with reserve management obligations.

Third, the $5 million minimum capital requirement extends into the ongoing operations phase.

The OCC’s final rule retains the $5 million minimum capital floor and extends it from the initial phase of newly approved issuers to their ongoing operations. Newly established issuers must meet the higher of the capital amount specified in their licensing conditions or $5 million; after transitioning to ongoing operations, issuers must continue to maintain capital commensurate with the scale and risk of their business, but not less than $5 million.

It is important to note that these funds are not reserve assets intended to support stablecoin redemptions. The OCC also requires issuers to maintain separate operational contingency assets equivalent to 12 months of total operating expenses to address scenarios such as operational disruptions. These three requirements serve distinct purposes and cannot substitute for one another.

Fourth, large redemptions cannot be automatically extended.

The draft originally proposed automatically extending the redemption period to seven calendar days during a surge in redemptions. The final version removes this mechanism: if a single-brand stablecoin receives redemption requests exceeding 10% of its outstanding issuance value within a 24-hour period, the issuer must notify the OCC within 24 hours; any extension of the redemption period must be separately requested and approved by the OCC.

These adjustments provide greater flexibility for reserve allocation while imposing clearer requirements on issuers’ ongoing operations and ability to meet redemption obligations: issuers must maintain adequate capital and operational backup assets, as well as proactively establish liquidity arrangements and redemption plans to handle concentrated redemption demands in a short period.

Based on the above operational requirements, the bank’s existing compliance, custody, and enterprise client systems can serve as a foundation for participating in stablecoin business. However, after obtaining issuance eligibility, it is still necessary to address payment products, channel integration, and real-world usage demands.

Crypto-native companies must integrate on-chain technology and distribution capabilities with ongoing redemption, capital management, and regulatory reporting. Some established issuers already have the necessary systems in place, and the extent of adjustments required must be assessed on a case-by-case basis. For smaller companies, capital, system, and reporting requirements may impose more pronounced fixed-cost pressures; whether this increases market concentration will depend on actual market entry and exit dynamics.

Competition over third-party rewards is particularly sensitive. The American Bankers Association (ABA) is concerned that stablecoin issuers may indirectly offer interest-like returns to token holders through affiliates, trading platforms, or other distribution partners, luring customers to shift bank deposits into stablecoins and undermining banks’ ability to fund local lending. Rob Nichols, President and CEO of the association, criticized the OCC for removing its original proposed measures targeting certain third-party reward arrangements, which he said would allow crypto platforms to continue their existing reward models. He argued that regulators should proactively guard against deposit outflows rather than wait for economic harm to occur before acting.

However, the U.S. White House Council of Economic Advisers (CEA), in its April 2026 report titled “The Impact of a Stablecoin Yield Ban on Bank Lending,” noted that the expansion of stablecoin holdings does not necessarily lead to an equal reduction in bank deposits. For example, when a customer withdraws funds from Bank A to purchase stablecoins, the issuer may use those funds to buy Treasury securities from a dealer; if the dealer then deposits the proceeds from the sale into Bank B, the funds simply shift between banks. Therefore, assessing the impact of stablecoins on the banking system requires further analysis of fund flows, the nature of deposits, and the varying financing pressures faced by different banks.

The differences in capabilities between banks and crypto-native companies translate into specific product requirements around obtaining issuance qualifications, managing reserves, and arranging channel partnerships and incentives. USDC, Open USD, and USDT all must address these requirements, but based on existing disclosures, each has distinct aspects worth noting.

Circle's disclosed USDC reserves include bank deposits, short-term U.S. Treasuries, and overnight repurchase agreements, and are subject to regular disclosures and monthly third-party attestation. These arrangements provide a business foundation for adapting to the new framework, though it remains to be seen how the actual issuer will align with the relevant operational requirements.

It is worth noting that in February 2026, Circle received OCC approval to establish a national trust bank, which will provide federally regulated custody services for USDC. However, USDC issuance and trust bank custody are separate businesses; the issuance of USDC cannot be assumed to be authorized under the GENIUS framework solely based on this banking charter.

For USDT, one key issue is how to gain access to the U.S. market. If entering the U.S. market through an offshore issuer pathway, it requires meeting conditions such as the Treasury’s determination of comparability of its regulatory framework, OCC registration, and providing liquidity for U.S. customer redemptions. Evaluating whether this pathway is viable depends on observing the progress of specific determinations and registrations.

Meanwhile, Tether has made a product-level distinction: USAT, designed for the U.S. market, is issued by Anchorage Digital Bank and structured under the GENIUS framework, while USDT continues to serve the global market. To analyze Tether’s U.S. strategy, it is necessary to examine the issuance and access arrangements for USAT and USDT separately; the bank-issued model of USAT does not automatically confer the same qualifications on USDT.

Open USD (OUSD) provides a concrete example of a reward distribution model. In my article “Open USD Just Launched, and Circle’s Stock Price Drops in Respect,” I noted that Open Standard, the operator of Open USD, plans to distribute all income generated from its reserve assets to partners that adopt and distribute OUSD, after deducting only a small management fee to cover operational costs. Open Standard is an independent company, while the actual issuer of OUSD is Bridge Building Inc.

This makes the previous third-party revenue dispute more specific: whether partners received rewards, what services they actually provided, and whether payments were made on behalf of the issuer will all affect the assessment. After the OCC removed the "rebuttable presumption," the reward arrangement for OUSD still requires evaluation based on actual contracts and payment relationships.