U.S. Office of the Comptroller of the Currency Finalizes Regulatory Framework for Payment Stablecoins Under GENIUS Act

On October 21, 2026, the U.S. Office of the Comptroller of the Currency (OCC) issued a final rule implementing the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) for payment stablecoin issuers subject to its jurisdiction. The OCC is the first primary federal payment stablecoin regulator to issue a final rule implementing the GENIUS Act, so the final rule offers the first settled view of how a federal regulator will apply the statute. The final rule and the GENIUS Act take effect January 18, 2027, and the OCC will announce separately when it will begin accepting applications and waiver requests pursuant to the GENIUS Act.

This Update outlines certain significant changes from the OCC’s proposal, which we discussed in a prior Sidley Update, and summarizes the final rule’s treatment of key topics including the regulatory perimeter, permitted activities, the yield prohibition, reserves, and redemption.

Key practical takeaways from the final rule:

• The OCC retreated from some of the proposal’s more restrictive approaches. The OCC eliminated the proposed rebuttable presumption that certain issuer arrangements with affiliates and related third parties violate the GENIUS Act’s yield prohibition, although it retained its anti-evasion authority and declined to adopt safe harbors. The OCC also declined to impose a one-brand-per-issuer restriction, eliminated the proposed automatic extension of the redemption period to seven calendar days, and loosened the proposed reserve diversification and surplus-withdrawal requirements.

• The final rule provides useful clarification concerning the regulatory perimeter. The final rule narrows “customer” to an issuer’s direct counterparties and defines “payment stablecoin holder” as the beneficial owner. In addition, the Supplementary Information states that a wrapped stablecoin generally would not be a payment stablecoin. These positions may have important implications for stablecoin product design and distribution models.
• The OCC leaves several important questions unresolved. The OCC declined to determine categorically whether services such as integration with payment networks, digital wallets, and money transmission using payment stablecoins are permissible activities for payment stablecoin issuers, explaining that such determinations depend on the specific activities involved. The OCC also left the treatment of crypto-asset bridging arrangements unresolved. Important questions therefore remain for payment networks, cross-border payment arrangements, and other stablecoin-enabled services.

I. Background

The GENIUS Act establishes a federal regulatory framework for payment stablecoin activities and, in many instances, leaves the specific requirements applicable to permitted payment stablecoin issuers (PPSIs) and foreign payment stablecoin issuers, including capital, liquidity, and operational risk management requirements, to regulations issued by the relevant primary federal payment stablecoin regulator. The OCC issued its Notice of Proposed Rulemaking to implement the GENIUS Act in February 2026 and received approximately 328 comments.

The final rule adds a new 12 C.F.R. part 15 and amends the OCC’s rules on capital adequacy (part 3), prompt corrective action (part 6), assessments (part 8), and practice and procedure (part 19). It applies to national banks and their subsidiaries, federal savings associations and their subsidiaries, federal branches and their subsidiaries, foreign payment stablecoin issuers, nonbank federal qualified payment stablecoin issuers, and certain state qualified payment stablecoin issuers as well as to certain custody activities of OCC-supervised entities. Bank Secrecy Act/anti-money laundering (BSA/AML) and sanctions requirements are addressed in a separate rulemaking. The OCC stated that it expects to update the regulations and issue guidance as issuer business practices develop and it gains supervisory experience.

II. The Regulatory Perimeter: Customers, Holders, and Wrapped Stablecoins

• Customers

Responding to commenters who viewed the proposed definition as capturing indirect relationships with holders, the final rule defines “customer” (outside the custody provisions, which use “covered customer”) by reference to the issuer’s direct counterparties. A holder that acquires a payment stablecoin from a third-party distributor, including a distributor associated with the stablecoin through a white-label arrangement, that does not act as the issuer’s agent is not the issuer’s customer unless and until the holder seeks to redeem from the issuer or otherwise purchases products or services directly from the issuer. The OCC stated that the definition does not affect the meaning of “customer” under other laws, including privacy laws and the Bank Secrecy Act.

• Payment Stablecoin Holders

The final rule defines “payment stablecoin holder” as the beneficial owner of a payment stablecoin. The OCC explained that the definition separates persons that merely control a payment stablecoin on another’s behalf, such as custodians, from persons that would benefit economically from a payment of interest or yield and that it does not affect the GENIUS Act’s insolvency provisions. Together, the narrower customer definition and the new holder definition determine which obligations run to direct counterparties and which run to beneficial owners, a distinction that will shape how issuers allocate onboarding, notification, and disclosure responsibilities across distribution chains.

• Wrapped Stablecoins

The OCC adopted the definition of “payment stablecoin” as proposed. Because “monetary value” does not include payment stablecoins, a stablecoin redeemable for a payment stablecoin is not itself a payment stablecoin, and therefore a “wrapped” stablecoin generally would not be a payment stablecoin for purposes of the OCC’s implementation of the GENIUS Act. The OCC also confirmed that the definition of “payment stablecoin” excludes deposits, including tokenized deposits.

III. Permitted Activities and the Yield Prohibition

• Permitted Activities

The final rule clarifies that the enumerated activities constitute an exclusive list of permissible issuer activities, subject to the separate authorization for certain digital asset service provider activities, and adds the following three activities to the list. First, a PPSI may hold non-payment stablecoin digital assets as principal as necessary to pay fees, including customer and network fees, or to conduct necessary testing on distributed ledger-based platforms, limited to quantities needed for the reasonably foreseeable conduct of those activities. Second, a PPSI may establish a trust arrangement for reserve assets, including by granting a security interest for the sole benefit of payment stablecoin holders, subject to conditions protecting timely redemption, holder priority, and the receiver’s ability to liquidate reserves. Third, a PPSI may manage foreign exchange risk subject to specified restrictions, including prior OCC approval and a prohibition on speculative positions. The final rule also clarifies that PPSIs may engage in the digital asset service provider activities contemplated by the GENIUS Act where independently authorized. This formulation is somewhat narrower than the GENIUS Act’s language, which requires only that such activities be “authorized by the primary Federal payment stablecoin regulator or the State payment stablecoin regulator, as applicable” and “consistent with all other Federal and State laws….” The OCC also clarified that activities need not be strictly necessary to the activities enumerated in the GENIUS Act to qualify as “directly support[ing]” those activities and that it will assess their permissibility on a brand- and technology-neutral basis. As provided in the GENIUS Act itself, the activity limits do not constrain the authority of any depository institution, national bank, or trust company to engage in activities otherwise permissible under State or Federal Law.

• Principal and Agency Activities

The OCC adopted without change the permitted activity of acting as principal or agent with respect to any payment stablecoin. The final rule imposes no express limits on the manner in which a PPSI acts as principal or agent, although payment stablecoins are not a permitted reserve asset. PPSIs may also repurchase their own stablecoins in secondary markets, provided the repurchases do not impair their redemption obligations or compliance with capital and liquidity requirements.

• The Yield Prohibition

The GENIUS Act prohibits a PPSI or foreign payment stablecoin issuer from paying a holder any form of interest or yield solely in connection with the holding, use, or retention of the payment stablecoin. The proposed rule had included a rebuttable presumption that this prohibition was violated where an issuer had an arrangement to pay an affiliate or related third party that, in turn, had an arrangement to pay interest or yield to holders.

The final rule eliminates this presumption and instead hews closely to the statutory prohibition. The OCC retains authority to address evasion of the yield prohibition and indicates that it will exercise its enforcement discretion based on the given facts and circumstances. The OCC declined to define “interest” or “yield,” stating that these are broad terms judged by economic substance rather than labels. It also declined to adopt any general safe harbor but indicated that absent contrary facts, payments for bona fide services generally would not be prohibited. The OCC also confirmed that the yield prohibition does not apply to interest paid on deposits in tokenized form, which are not covered as payment stablecoins. Rather than issue guidance now regarding the types of potentially prohibited transactions, the OCC will monitor arrangements through its review of applications and ongoing supervision and take action where it identifies violations or evasion, and it anticipates a future rulemaking clarifying the prohibition.

IV. Multi-Brand Issuance

The OCC declined to adopt a one-brand-per-issuer requirement on which it had sought comment in the proposal, citing the burden on issuers and the absence of a clear statutory mandate, although it stated that a one-brand structure may better protect holders than other models. The final rule accommodates structures that use multiple special purpose vehicle (SPV) issuers, each of which requires its own license, and the OCC stated it will streamline the process for related SPVs.

V. Reserve Assets and Redemption

• Reserve Sufficiency and Buffers

The final rule relaxes several of the proposal’s quantitative liquidity, diversification, and concentration requirements while retaining specified minimum requirements and supplementing them with principles-based standards, stress testing, and reserve buffer requirements. A PPSI must ensure that reserve asset value equals or exceeds outstanding issuance value at all times. It must also ensure that the reserve portfolio can support timely redemption in normal conditions and in adverse economic, liquidity, market, and interest rate conditions, including, to the extent necessary, by maintaining a buffer of reserve assets above outstanding issuance value.

The OCC did not mandate a particular buffer level. A portfolio of immediately available liquidity, such as deposits payable on demand, may need little or no buffer, while a longer-duration portfolio may need a more substantial buffer. Surplus reserves may be withdrawn at any time, rather than once per month, following due diligence and confirmation that the withdrawal will not cause reserves to fall below outstanding issuance value.

• Diversification and Concentration

Reserve assets must be sufficiently diverse to manage potential credit, liquidity, interest rate, and price risks. A PPSI must also measure and manage the risk that concentrating reserves at one or a small number of eligible financial institutions could impair redemptions if an institution is unable to return, or delays returning, reserve assets. Satisfying these principles may require holdings above the quantitative minimums and above outstanding issuance value. Diversification is not required, however, across reserve asset custodians.

• Redemption Timing

The final rule retains the two-business-day outer limit for timely redemption and defines when that period starts and ends. The OCC eliminated the proposed automatic extension of the redemption period to seven calendar days that would have applied when redemption requests exceed 10% of outstanding issuance value of any brand of payment stablecoin in a 24-hour period. A PPSI that crosses that threshold must notify the OCC within 24 hours and may request an extension, which the OCC may grant or deny, potentially posing operational challenges in a period of severe stress.

VI. Risk Management, Supervision, and Capital

• Risk Management and Supervision

In addition to the monetization and stress testing requirements discussed in Section V, the final rule requires foreign exchange risk management for issuers that issue payment stablecoins denominated in a monetary value other than the U.S. dollar. It also revises the insider and affiliate transaction standards to cover transactions that are quantitatively detrimental in light of the PPSI’s business model. For qualifying issuers, the extended examination cycle is shortened from 18–36 months to 18–24 months, and the proposed trading-volume criterion is removed. After the initial board certification, compliance certifications may be made by the Bank Secrecy Act officer, the board, or an appropriate board committee.

• Capital

The final rule replaces the proposal’s bank-style capital elements with a measure based on tangible equity under U.S. generally accepted accounting principles (GAAP). Any instrument that qualifies as equity under GAAP qualifies as capital for PPSIs, less certain deductions.

The OCC noted that most instruments that qualify as common equity tier 1 or additional tier 1 capital under the bank regulatory framework likely also qualify as equity under GAAP without the need for bank issuers to reissue those instruments. PPSIs must track compliance with the minimum capital and operational backstop requirements throughout the quarter rather than only at quarter-end. If a PPSI’s capital or backstop fall below the minimum requirements, the PPSI must notify the OCC within 24 hours. A PPSI that remains noncompliant at quarter-end generally may not issue new payment stablecoins until it regains compliance, and a PPSI that remains noncompliant at the end of two consecutive quarters must begin liquidation of reserve assets and redemption of outstanding payment stablecoins, may not charge redemption fees, and may not issue new payment stablecoins.

• Operational Backstop

The operational backstop must equal 12 months of total expenses, held in specified liquid assets. This exceeds the 6 months of operating expenses typically required by the OCC in connection with public conditional approval orders for uninsured national trust banks issued over the last year. The minimum capital and operational backstop requirements cannot be met with the same equity, as any portion of the backstop not funded by qualifying debt is deducted from capital. The OCC may allow a PPSI to keep operating while its backstop is below the required amount if three conditions are met:

• The backstop assets were used to address a temporary disruption or other operational event.
• The PPSI submits, within seven days, a plan to restore the backstop assets within 90 days.
• The OCC deems the plan viable.

• Bank Parents and National Trust Banks

The adjustments to the bank capital rule in 12 C.F.R. part 3 for banks with PPSI subsidiaries are adopted largely as proposed. The final rule contains no requirement or supervisory expectation that a parent bank act as a source of strength for its PPSI subsidiary.

An uninsured national trust bank may elect the GENIUS Act capital framework in place of part 3, but only with the OCC’s prior approval. The OCC will grant or deny an election within 60 days of a complete request, and the trust bank may revert to part 3 by notice. A successful election by an uninsured national trust bank to apply the GENIUS Act capital framework in lieu of part 3 capital rules does not allow the bank to stop complying with any OCC enforcement action, order, directive, or “document” that specifies a different minimum capital requirement that applies to the bank. This is important because for uninsured national trust banks, the limiting capital requirement is often determined individually under 2007 OCC guidance regarding trust bank capital (rather than under part 3) and formalized in an approval order that could be considered a “document” for this purpose. The OCC plans to address the capital treatment of digital assets held by banks, including stablecoins, in a separate rulemaking. Institutions with conditional approvals or pending applications to establish limited purpose national trust banks to issue payment stablecoins will want to reassess their capital planning in light of the final rule. Institutions already operating should also consider their options.

VII. Custody

The custody provisions, which apply to national banks, federal savings associations, federal branches of foreign banks, and permitted payment stablecoin issuers to the extent of such person’s provision of custodial or safekeeping services for covered assets (even if they do not issue stablecoins), are largely adopted as proposed. The final rule limits “covered assets” to specified categories of assets relating to payment stablecoins offered, sold, or otherwise made available to persons in the United States. These categories include reserve assets, payment stablecoins used as collateral where the custodian has actual knowledge of such use, and certain related cash and other property. The final rule also requires written custody agreements and clarifies the exclusion for entities that provide self-custody hardware or software without controlling the relevant private keys.

The final rule also expressly permits a covered custodian to hold its own assets and covered customer assets in omnibus accounts at a sub-custodian, provided the covered custodian maintains adequate safeguards and internal controls reasonably designed to ensure that customer assets remain segregated from the sub-custodian’s own assets. A covered custodian’s use of omnibus accounts must be fully disclosed in the applicable custody agreement.

On cross-chain bridging arrangements involving customer assets locked in smart contracts, the OCC described a number of unsettled legal questions and declined to provide definitive answers. It expects covered custodians to understand the mechanics, legal roles, code, contract terms, and redemption rights of any bridge in which customer assets are locked and stated that absent OCC guidance or clear case law, custodians may rely on a well-founded legal analysis.

VIII. Return to State Regulation

The final rule provides a path back to state supervision, which the proposal did not address. A nonbank state qualified payment stablecoin issuer that transitioned to the OCC’s framework after exceeding $10 billion in total consolidated outstanding issuance value generally is no longer required to comply with part 15, and ceases to be supervised by the OCC, once the OCC determines that it no longer exceeds that threshold. The OCC may make that determination on the issuer’s request, supplemented by any information the OCC reasonably requires, or on its own. The OCC stated that it may review such a request to prevent evasion of Section 4 of the GENIUS Act, which sets the core requirements for issuing payment stablecoins and requires nonbank state qualified issuers above $10 billion in total consolidated outstanding issuance value to transition to federal oversight. The OCC also retains backup enforcement authority over issuers that return to sole state supervision.

IX. Application and Approval Framework

The OCC largely adopted the application and approval framework as proposed. Among the targeted changes, the OCC added an express review factor for whether an applicant’s proposed structure adequately addresses run risk and ensures the ability to redeem, required applicants to certify whether the GENIUS Act’s additional requirements for non-financial services public companies apply, and clarified hearing and appeal procedures. The OCC concurrently issued guidance on waivers and application submissions.

X. Foreign Payment Stablecoin Issuer Exemption

The final rule sets the conditions under which a foreign payment stablecoin issuer is not subject to the GENIUS Act’s prohibition on the issuance of payment stablecoins in the United States by any person other than a PPSI. The issuer must be subject to a foreign regime that the Secretary of the Treasury has determined to be comparable to the GENIUS Act and must be registered with and subject to ongoing monitoring by the OCC. The foreign issuer must also hold reserves at U.S. eligible financial institutions sufficient to meet the liquidity demands of U.S. customers unless a reciprocal arrangement implemented by Treasury provides otherwise. The eligible financial institution itself, not merely a branch, agency, or other office, must be organized under federal or state law. The final rule also adds four alternative ways for foreign issuers to satisfy the liquidity condition.

XI. Outlook

The GENIUS Act and the final rule both take effect on January 18, 2027. The implementation will be shaped by the OCC’s separate announcement of when it will begin processing applications, the pending BSA/AML and sanctions rulemaking, and the rules of the other primary federal payment stablecoin regulators. Because the OCC has deferred many consequential questions, including the reach of the yield prohibition, to supervision and future guidance, the licensing process and early supervisory interactions will likely play an important role in defining how the framework operates in practice.