Cryptocurrency companies can keep paying interest-like rewards, say federal bank regulators
The new rules are part of the implementation of the GENIUS Act, which was signed into law last year and was meant to codify the rules and regulations around issuers of stablecoins.
Federal regulators have ruled that cryptocurrency companies can continue offering interest-like rewards to customers, despite banking concerns that such programs could siphon trillions of dollars from the banking system. The new guidelines, part of the GENIUS Act implementation, pertain to stablecoin issuers like Circle. Exchanges, including Coinbase and Robinhood, are permitted to distribute any earnings from stablecoins to customers in the form of interest-like rewards.
Stablecoins, designed to maintain a stable value, are backed by deposits and U.S. Treasuries, yielding interest. Banks argue that converting this interest into rewards for stablecoin holders could lead to customers moving their savings into crypto, a phenomenon known as "deposit flight." This could weaken banks' lending capacity and potentially result in bank closures.
However, the OCC has allowed exchanges to offer such rewards on a case-by-case basis. The American Bankers Association expressed concern that the decision undermines the ability of banks to lend and protect the overall U.S. economy.
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