- OCC issues draft rules for GENIUS Act payment stablecoins, covering issuer eligibility, reserve backing, par redemption, and supervisory oversight
- Proposal extends OCC authority to certain state and foreign issuers, with the new stablecoin regime set to start by January 2027 at the latest
The Office of the Comptroller of the Currency (OCC) has moved to translate the GENIUS Act into detailed regulatory standards for payment stablecoins, setting out how these digital assets will be issued, backed, and supervised under federal authority. In a notice of proposed rulemaking released on Wednesday, the banking regulator opened a 60-day comment window that will shape the final framework, which could come into force as early as 120 days after rules are completed and no later than January 2027.
OCC proposal to implement the GENIUS Act
The GENIUS Act, formally titled the Guiding and Establishing National Innovation for U.S. Stablecoins Act, became law in July and is described as the first federal framework focused specifically on stablecoins. The statute generally limits issuance of payment stablecoins in the United States to entities designated as “permitted payment stablecoin issuers” and prohibits digital asset service providers from offering stablecoins that do not comply with its requirements to U.S. users. The OCC’s proposal represents the first comprehensive effort to spell out how that law will operate in practice for institutions under its remit.
Under the draft, the agency lays out standards for how payment stablecoins must be backed, how reserves are managed, and how issuers handle redemptions and liquidity. The proposal also specifies how federal supervisors would monitor compliance and, where necessary, wind down an issuer’s operations. By launching a 60-day public consultation, the OCC is asking banks, non-bank firms, and other stakeholders to comment on the structure of this oversight, including the conditions under which a payment stablecoin might be shut down.
Scope of oversight and key regulatory components
The occ proposal describes a broad supervisory perimeter that extends across several types of issuers. It states that the agency will have regulatory or enforcement authority over certain permitted payment stablecoin issuers, including subsidiaries of national banks and federal savings associations, federally qualified payment stablecoin issuers, and some state-qualified issuers. In addition, the document notes that the OCC intends to exercise regulatory authority over foreign payment stablecoin issuers that seek access to the U.S. market, potentially bringing offshore operators into direct federal supervision if they want to serve American users.
Central to the draft are requirements around reserve assets and redemption practices. The rules set out standards for what can constitute reserves and require that payment stablecoins be redeemable at par, reinforcing a 1:1 backing structure. Liquidity and risk management controls are also specified, alongside obligations for audits, supervisory examinations, and custody arrangements. New entrants would face defined application pathways to obtain status as permitted issuers, aligning them with existing prudential expectations in the banking sector.
The proposal goes further by introducing what it calls a “capital and operational backstop,” and by amending existing capital adequacy and enforcement rules to account for payment stablecoin activities. These changes are aimed at ensuring that issuers maintain sufficient buffer and operational resilience, even though stablecoins are backed by reserves rather than traditional deposit funding. However, issues related to the Bank Secrecy Act and sanctions compliance are not part of this particular notice; the OCC has said those topics will be handled separately in coordination with the Treasury Department.
Industry reaction and debate over stability and risk
Market participants and banking groups have already begun to weigh in on the direction of U.S. stablecoin policy. Musheer Ahmed, founder and managing director of Finstep Asia, described the effect of the regulations as integrating the stablecoin sector into the traditional financial system, with close oversight and links to the banking industry. He expects the U.S. market to see a range of regulated stablecoins issued by non-banks, payment companies, and crypto firms, with a focus on tokenized use cases tied to traditional finance.
Banks, however, have expressed concerns about how the GENIUS Act might play out. In August, banking industry groups wrote to Congress calling for several “loopholes” in the law to be closed, warning that yield-bearing offerings linked to stablecoins could spur substantial outflows of deposits. They argued that such products could draw customers away from bank balance sheets, especially if returns appear more attractive than insured deposits.
OCC Chief Jonathan Gould has pushed back on scenarios that envision a rapid, destabilizing shift of deposits. Speaking at an American Bankers Association conference in October, he said that any significant movement of deposits would not go unnoticed and would not occur “overnight.” His comments suggest that the agency believes it can monitor and respond to shifts in funding patterns as the stablecoin market develops under the new framework.
Ahmed has also argued that, under stress conditions, regulated stablecoins could compare favorably to banks from a solvency perspective, provided that rules are enforced. He pointed out that banks commonly operate with capital ratios in the range of 10–20%, whereas stablecoin issuers governed by the new standards would have to maintain 100% reserves to support 1:1 redemptions. That structure, in his view, makes them “fairly solvent” as long as reserve mandates are respected and properly supervised.
In an extreme market environment, Ahmed suggested that the ultimate support could come from the Federal Reserve, not by directly rescuing stablecoin issuers, but by stabilizing the assets that back their tokens. Since reserves are expected to consist largely of U.S. Treasuries and cash equivalents, central bank actions to support those markets could indirectly reinforce stablecoin stability without explicit guarantees to the issuing entities themselves.
Conclusion
The occ’s proposed rules to implement the GENIUS Act mark a significant step in defining how payment stablecoins operate under U.S. federal oversight. By setting standards for reserves, redemption at par, risk management, audits, and issuer eligibility, the draft framework seeks to align stablecoin issuers with elements of traditional prudential regulation while carving out a regime tailored to tokenized instruments. The agency’s plan to supervise domestic and foreign issuers alike, combined with a transition timeline that could begin as soon as 120 days after rule finalization and no later than January 2027, signals an accelerated move toward a regulated stablecoin environment. As banks, crypto firms, and policymakers debate potential deposit shifts and systemic risks, the comment period will determine how the final rules balance innovation, market stability, and the evolving role of dollar-linked digital assets in the financial system.
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