Banking and Finance Law Daily Wrap Up, FINANCIAL TECHNOLOGY—ABA, state bankers urge OCC to tighten stablecoin yield ban, (May 4, 2026)

By Shashi Kant, BALLB, LLM.

Separate comment letters press OCC to close indirect-yield loopholes, clarify redemption and custody duties, and address deposit-flight and consumer-protection risks.

Banking and community groups filed sharply different comments on the Office of the Comptroller of the Currency’s proposed rule implementing the GENIUS Act, with the American Bankers Association and 52 state bankers associations urging the agency to strengthen the proposal’s prohibition on interest and yield tied to payment stablecoins, while the National Community Reinvestment Coalition (NCRC) argued it is premature to finalize the rule at all. The comments respond to the OCC’s February proposal to implement the GENIUS Act for permitted payment stablecoin issuers and certain custody activities under OCC supervision (see Banking and Finance Law Daily, Feb. 26, 2026).

The OCC’s proposal would establish a new regulatory framework for stablecoin issuers under its jurisdiction, addressing activities, reserve assets, redemption, risk management, applications, registrations, and related requirements. In separate filings, ABA and the state bankers associations said the rule should do more to prevent stablecoins from functioning as de facto yield-bearing instruments that could draw deposits from the banking system. NCRC, by contrast, said unresolved legislative and regulatory questions make finalization premature and urged the OCC to address risks of deposit flight, bank runs, unclear redemption and disclosure regimes, and consumer fraud.

Bankers target indirect yield through exchanges and intermediaries. In a joint comment letter summarized by ABA, the trade group and 52 state bankers associations said the OCC should strengthen the proposed yield prohibition to ensure it is meaningful and enforceable. They argued that stablecoin issuers could otherwise evade the GENIUS Act’s express ban on interest and yield by routing economically equivalent payments through exchanges and other third-party intermediaries. ABA said most payment stablecoins are distributed through exchanges and intermediaries rather than directly by issuers, so allowing yield to flow through those channels would defeat what it described as Congress’s central policy choice.

The bankers’ groups urged the OCC to broaden the proposal’s rebuttable presumption so it applies regardless of how upstream payments are labeled, expand the definition of “related third party” to capture distribution and promotion partners, and clarify that yield may not be provided directly or indirectly when it arises from holding or using a stablecoin. They also urged the OCC to make clear that the statutory phrase “solely in connection with” cannot be used to evade the prohibition through nominal additional conditions. ABA said a narrow or technical interpretation would invite circumvention and create deposit-substitution effects that could materially reduce lending capacity, particularly at community banks.

ABA’s separate letter presses broader structural changes. In a separate letter, ABA said the OCC should coordinate the GENIUS Act rulemakings with other agencies before finalizing any rules, warning that inconsistent federal and state frameworks could create opportunities for regulatory arbitrage. ABA also urged the OCC to clarify the statute’s effective-date trigger, codify additional application review factors tied to safety and soundness, consumer protection, AML/CFT compliance, technology architecture, governance, and affiliation risk, and subject material waiver requests to public notice and comment. ABA further argued that the proposal leaves key questions unresolved for issuers and custodians. Among other things, it said the OCC should expressly supersede prior OCC guidance that required custodians to monitor stablecoin reserve sufficiency, clarify that reserve-composition reporting by permitted-investment category is an issuer obligation rather than a custodian obligation, adopt a technology-neutral definition of “redemption,” and replace what it described as the proposal’s individualized, examination-driven capital approach with standardized and transparent capital requirements. ABA also urged the OCC to create a conditional-approval mechanism for applications analogous to de novo bank charter approvals.

NCRC says rule should wait and focus more on systemic and consumer risks. NCRC tells the OCC that finalization should be delayed because the stablecoin market structure, related federal rulemakings, and parallel legislative proposals remain in flux. The group said the OCC should not finalize the rule until subsequent legislation addresses unresolved issues. On the merits, NCRC said the proposed yield provisions do not go far enough to prevent deposit flight because they still leave room for indirect yield payments through exchanges and other intermediaries. Like ABA, NCRC urged the OCC to address exchange-based workarounds, but it also emphasized broader community-development and financial-stability concerns, arguing that large-scale movement of funds from bank deposits to stablecoins could impair banks’ lending and investment capacity.

NCRC additionally warned that the proposal’s redemption framework could contribute to run risk if large numbers of holders seek to redeem at once, and it said the disclosure regime may be ineffective where issuers lack a direct relationship with holders that obtain stablecoins through exchanges. NCRC also urged the OCC to build in stronger consumer protections, including a chargeback-like system requiring issuers to investigate claims of fraud and fraudulent inducement and to make harmed consumers whole. The group further argued that omnibus custody arrangements could complicate redemption and bankruptcy administration, increasing the likelihood of government intervention if an issuer or custodian fails.

Companies: Alabama Bankers Association; Alaska Bankers Association; American Bankers Association; Arizona Bankers Association; Arkansas Bankers Association; California Bankers Association; Colorado Bankers Association; Connecticut Bankers Association; DC Bankers Association; Delaware Bankers Association; Florida Bankers Association; Georgia Bankers Association; Hawaii Bankers Association; Idaho Bankers Association; Illinois Bankers Association; Indiana Bankers Association; Iowa Bankers Association; Kansas Bankers Association; Kentucky Bankers Association; Louisiana Bankers Association; Maine Bankers Association; Maryland Bankers Association; Massachusetts Bankers Association; Michigan Bankers Association; Minnesota Bankers Association; Mississippi Bankers Association; Missouri Bankers Association; Montana Bankers Association; National Community Reinvestment Coalition; Nebraska Bankers Association; Nevada Bankers Association; New Hampshire Bankers Association; New Jersey Bankers Association; New Mexico Bankers Association; New York Bankers Association; North Carolina Bankers Association; North Dakota Bankers Association; Ohio Bankers League; Oklahoma Bankers Association; Oregon Bankers Association; Pennsylvania Bankers Association; Puerto Rico Bankers Association; Rhode Island Bankers Association; South Carolina Bankers Association; South Dakota Bankers Association; Tennessee Bankers Association; Texas Bankers Association; Utah Bankers Association; Vermont Bankers Association; Virginia Bankers Association; Washington Bankers Association; West Virginia Bankers Association; Wisconsin Bankers Association; Wyoming Bankers Association

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