Implementing the GENIUS Act: The OCC Proposes Comprehensive Rulemaking Governing Payment Stablecoins Issuance

On February 25, 2026, the Office of the Comptroller of the Currency (OCC) issued a Notice of Proposed Rulemaking (Proposal) to implement a comprehensive federal payment stablecoin regulatory regime for OCC-supervised entities under the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act). The Proposal marks a pivotal step in implementing the GENIUS Act and follows recent narrower rules proposed by the Federal Deposit Insurance Corporation (FDIC) and National Credit Union Administration (NCUA) to establish application procedures for entities subject to FDIC and NCUA supervision that may seek approval to become permitted payment stablecoin issuers (PPSIs).¹

This Advisory provides an overview of the OCC’s Proposal and its potential implications if adopted as proposed. First, we discuss the Proposal’s scope and licensing and registration requirements. Second, we summarize the proposed regulatory environment and ongoing requirements for licensed entities, including standards applicable to PPSIs and custodians, and provide an overview of the key areas for comment during the 60-day comment period.

This Advisory is part of a series by Arnold & Porter covering the evolution of the digital asset landscape in the U.S. For information about the adoption of stablecoin legislation, including an overview and analysis of the GENIUS Act, please see our What You Need to Know About the New Stablecoin Legislation Advisory.

The Proposed Rule

The Proposed Rule would create a new OCC regulation — to be codified as 12 C.F.R. Part 15 — and would also amend existing OCC regulations under Parts 3, 6, 8, and 19. Among other things, the Proposal seeks to establish risk management, capital, liquidity, and custody requirements, bring issuers of payment stablecoins into the OCC’s existing enforcement framework, and develop standards for payment stablecoin activities conducted by OCC-supervised entities under the GENIUS Act. The Proposal would also establish standards regarding reserve asset composition and diversification, redemption policy requirements and mechanics, and custody of payment stablecoins. The breadth of the OCC’s proposed regulatory framework signals that institutions considering entry into the payment stablecoin market will face robust licensing and ongoing regulatory compliance obligations.

Scope, Applicability, and Licensing and Registration Requirements

The Proposal would apply to national banks, federal savings associations, and federal branches, and, in each case, their subsidiaries, as well as nonbank entities that are approved as federal qualified payment stablecoin issuers (FQPSIs) (including certain nonbank entities, uninsured national banks, and federal branches), certain state qualified payment stablecoin issuers (SQPSIs), and foreign payment stablecoin issuers registered with the OCC.² The Proposal clarifies that, notwithstanding the broader statutory definition of “permitted payment stablecoin issuer,” proposed Part 15 would apply only to entities within the OCC’s supervisory jurisdiction. The OCC would exercise its enforcement authority under Section 5 of the GENIUS Act using the OCC’s existing enforcement framework.³

The Proposal also identifies several GENIUS Act provisions as self-executing — particularly those addressing federal preemption and exclusive OCC supervision of federal qualified issuers — and therefore does not propose to codify those provisions. The OCC requests comments on whether codification would promote clarity.

Approval to Issue — Application Procedures and Requirements

If adopted, the Proposal would require any insured national bank, federal savings association, or insured federal branch that seeks to issue payment stablecoins through a subsidiary to file an application and receive prior OCC approval before issuing payment stablecoins.⁴ Nonbank entities, uninsured national banks, and uninsured federal branches likewise would be required to obtain OCC approval before issuing payment stablecoins. The OCC proposes that applications include information sufficient for it to assess the entity’s financial condition and resources, compliance capabilities, and redemption policies; the competence, experience, and integrity of directors, officers, and principal shareholders; and its ability to operate in a safe-and-sound manner.

The OCC would determine whether the application is “substantially complete” and render a decision within 120 days of that determination. The OCC could deny an application only if the applicant’s activities would be unsafe or unsound based on statutory factors.

State and Foreign Issuers

State issuers generally are not subject to OCC supervision, but the Proposal establishes a mechanism to bring large state-chartered issuers into the federal framework. SQPSIs exceeding $10 billion in “outstanding issuance value” must transition to federal oversight within 360 days unless granted a waiver.⁵ The Proposal would define “outstanding issuance value” to mean the total consolidated par value of all of a payment stablecoin issuer’s payment stablecoins, and would include the combined total par value of different brands of payment stablecoin issued by the payment stablecoin issuer (e.g., those issued under a white label arrangement).⁶

Waiver determinations hinge on state regime comparability and supervisory history. Although state issuers that do not meet the $10 billion threshold would not be supervised by the OCC or subject to federal regulation, the GENIUS Act nonetheless imposes federal requirements on all state regimes: state regulators must certify the state’s regulatory regime meets the standards of federal legislation and the certification will be reviewed by the Stablecoin Certification Review Committee.⁷

Foreign payment stablecoin issuers would generally be prohibited from issuing payment stablecoins in the U.S., unless the issuer meets certain requirements.⁸ Namely, the foreign payment stablecoin issuer must be subject to, and in compliance with a comparable foreign regulatory regime, as determined by the Secretary of the Treasury. The Proposal contemplates that Treasury will evaluate whether the foreign regime provides standards that are substantially similar to, and at least as robust as, the U.S. federal framework in key areas, including:

• Reserve requirements (e.g., high-quality liquid assets held on at least a 1:1 basis)
• Redemption rights and timelines
• Prudential supervision and examination authority
• Capital, liquidity, and risk management standards
• Bank Secrecy Act (BSA), Anti-Money Laundering (AML), and sanctions compliance obligations
• Enforcement tools and insolvency protections

If a foreign regime is deemed comparable, the Proposal would require foreign payment stablecoin issuers to register with the OCC if their stablecoins are offered or made available to U.S. persons through a digital asset service provider.⁹ Registration would require submission of, among other things, organizational and ownership information, details regarding the foreign supervisory authority, reserve composition and custody arrangements, and BSA/AML and sanctions compliance programs.

Additionally, foreign payment stablecoin issuers would be required to hold sufficient U.S.-based reserves to meet U.S. customer liquidity demands, submit to U.S. jurisdiction, commit to comply with U.S. “lawful orders” (including, but not limited to, orders requiring the seizure, freezing, burning, or prevention of transfer of payment stablecoin), and comply with reporting and examination requirements.¹⁰

Regulatory Environment and Ongoing Requirements

The Proposal represents the first detailed articulation of the regulatory environment in which permitted payment stablecoin issuers (PPSIs) will be required to operate, and it covers a broad range of prudential and operational obligations. This section of the Advisory provides an overview of the proposed regulatory requirements, including permissible and prohibited activities, including the prohibition on interest or yield payments by PPSIs to holders of payment stablecoins; reserve asset composition and diversification requirements; capital requirements; and standards for safeguarding payment stablecoins and reserve assets that would apply to custodians.

Permissible Activities

The Proposal mirrors Section 4(a)(7) of the GENIUS Act, which addresses permissible activities. Specifically, PPSIs would be authorized to engage in:

• The issuance and redemption of payment stablecoins 
• Management of reserves, including purchasing and holding permissible reserve assets 
• Custodial or safekeeping services for payment stablecoins and reserves 
• Acting as principal or agent with respect to payment stablecoins 
• Activities that directly support these core functions 

The Proposal would also expressly permit PPSIs to assess fees associated with purchasing or redeeming stablecoins and to pay transaction fees on distributed ledgers.¹¹

Interest and Yield Prohibition

Consistent with Section 4(a)(11) of the GENIUS Act, the Proposal would prohibit payment of interest or yield by PPSIs to holders “solely in connection with the holding, use, or retention” of payment stablecoins.¹² However, the Proposal also includes a rebuttable presumption that certain compensation arrangements with “affiliates” or “related third parties” constitute prohibited indirect yield payments (whether paid in tokens, cash, or other forms of consideration). Specifically, the OCC would presume that a PPSI is paying a yield, within the scope of the prohibition, if the PPSI has a contract, agreement, or other arrangement with an affiliate or related third party to pay interest or yield to such affiliate or third party, or the affiliate or related third party, or the related third party’s affiliate, has a contract, agreement, or other arrangement to pay interest or yield to a holder of a payment stablecoin issued by the PPSI “solely in connection with the holding, use, or retention of payment stablecoins.”¹³ “Affiliates” would be defined to mean a person that controls, is controlled by, or is under common control with another person.¹⁴

For purposes of the prohibition, a “related third party” would mean “a person offering to pay interest or yield to payment stablecoin holders as a service, and any person that the issuer issues payment stablecoins on the person’s behalf or under the person’s branding.”¹⁵ PPSIs may rebut the presumption by submitting written materials demonstrating the arrangement is not an evasion.

The Proposal also implements the GENIUS Act’s statutory prohibition on pledging, rehypothecating, or reusing reserve assets.¹⁶ Consistent with the statute, the Proposal would codify exceptions to the prohibition for the purpose of satisfying margin obligations, for standard custodial services, or to create liquidity to meet redemption demands through overnight repurchase agreements backed by short-term Treasuries. The Proposal would also deem certain repurchase agreement transactions pre-approved by rule, provided they satisfy statutory maturity and clearing conditions.

Reserve Assets Composition and Management

Consistent with the GENIUS Act, the Proposal would require that reserve assets be identifiable, separately held, and never commingled with corporate assets.¹⁷ Reserve assets would be required to have, at all times, a total fair value equal to or exceeding outstanding issuance value. PPSIs would also need to demonstrate the operational capability to access and monetize reserve assets, commensurate with the risk profile and business model of the relevant PPSI.

The Proposal would codify the GENIUS Act’s statutory list of permissible assets,¹⁸ including:

• U.S. coins and currency and Federal Reserve balances 
• Demand deposits held at insured depository institutions (or held at foreign branches or correspondent banks of an insured depository institution) 
• Treasury securities with less than 93-day maturity
• Money received from overnight repurchase agreements and reverse repurchase agreements backed by eligible Treasuries that comply with clearing and other enumerated requirements
• Government money market funds invested solely in eligible assets 
• Certain tokenized forms of the foregoing 

PPSIs with over $25 billion in outstanding issuance would be required to maintain at least 0.5% of reserves (capped at $500 million) as insured deposits or insured shares at an insured depository institution.¹⁹ The OCC invites comment on whether additional “similarly liquid Federal Government-issued assets” should be approved under the Proposal.

The OCC’s proposed definition of “money” expands on the GENIUS Act’s definition to expressly include “monetary value,” in addition to any medium of exchange that the OCC has determined is currently authorized or adopted by a domestic or foreign government, including a monetary unit of account established by an intergovernmental organization or by agreement between two or more countries.²⁰ Further, in an effort to promote clarity and uniformity regarding whether particular assets qualify as “money,” the OCC would provide public confirmation that a “medium of exchange” meets the definition of “money.” The OCC expects to issue public determinations, when appropriate, on its own volition or at the request of interested parties.

Reserve Asset Diversification Requirements

The OCC’s Proposal presents two alternatives for reserve asset diversification requirements aimed at mitigating credit, liquidity, interest-rate and price risks, and invites public comments on which alternative to adopt in a final rule.²¹ The first is a principles-based requirement that includes a quantitative safe harbor. To qualify for the safe harbor, PPSIs would be required, on each business day, to:

• Maintain at least 10% of reserve assets as deposits or insured shares payable on demand or funds held in Federal Reserve balances for purposes of daily liquidity
• Maintain at least 30% of reserve assets as described above or in amounts receivable and due unconditionally within five days as weekly liquidity 
• Limit exposure to any single eligible financial institution to 40% of reserve assets 
• Limit concentration of daily liquidity at a single institution to 50%
• Maintain weighted average maturity of no more than 20 days across the total stock of reserve assets 

The second alternative would impose the safe harbor thresholds as mandatory quantitative requirements. The practical implications of each alternative differ significantly for PPSIs with concentrated reserve portfolios, and impacted entities should carefully consider which approach better reflects sound risk management practice before submitting comments.

If reserves fall below required minimums, PPSIs would be required to notify the OCC and would be immediately barred from issuing new stablecoins.²² After 15 consecutive business days of deficiency, the issuer would be required to begin liquidation and redemption.

To ensure effective compliance, the Proposal would require monthly public disclosures of the composition of reserve assets.²³ Disclosures must include, among other items, the total outstanding issuance, fair value and composition of reserves, average tenor, and geographic location of custody. The Proposal includes a form of composition report template that issuers may use to satisfy this requirement. The disclosure report must be examined monthly by a registered public accounting firm, and such examination report must be published by the issuer on its public website at the same time as the posting of its monthly composition report. In addition, the CEO and CFO of the issuer will be required to certify the accuracy of the report to the OCC.

Redemption

The Proposal would implement the GENIUS Act’s requirement that a payment stablecoin issuer be obligated to redeem its tokens for a fixed amount of monetary value. Under the GENIUS Act, the statutory definition of a “payment stablecoin” hinges on this redemption obligation, and the OCC’s Proposal accordingly treats redemption as a core consumer protection requirement.

The OCC’s Proposal interprets the statutory requirement that an issuer be obligated to redeem a “payment stablecoin” as requiring redemption in amounts of one token or more.²⁴ The Proposal would define “timely” redemption as no later than two business days after a valid redemption request. This requirement must also be included in the PPSI’s published redemption policy, as discussed further below. While many existing stablecoin issuers offer same-day or near-instant redemption for certain counterparties, the two-business-day outer limit provides regulatory certainty while preserving operational flexibility. Nevertheless, the Proposal would also establish a redemption gating mechanism that automatically extends the redemption period to 7 calendar days when redemption demands exceed 10% of a PPSI’s outstanding issuance value in a 24-hour period.²⁵ This feature is designed to mitigate run risk and facilitate orderly asset liquidation, particularly where reserve assets must be monetized under stressed market conditions. Importantly, the extension would be non-discretionary once triggered, all pending and subsequent redemption requests would be subject to the extended timeline, and early redemptions during the extension period would require OCC approval to ensure fairness and orderly treatment of holders.

The Proposal would require each PPSI to publicly disclose a clear and comprehensive redemption policy.²⁶ At a minimum, that policy must include:

• The timeframe within which the issuer will redeem payment stablecoins (subject to the regulatory maximum)
• A statement that discretionary limitations on timely redemption may be imposed only by the OCC (or, in the case of a State-qualified issuer, by the OCC, the Federal Reserve, or the relevant state regulator)
• Disclosure of the circumstances under which redemption periods may be extended
• Clear instructions on how holders may redeem
• Any minimum redemption amount (which would be required to be redeemed in any number greater than or equal to one payment stablecoin)

In addition to adopting a formal redemption policy, the Proposal would require issuers to disclose specified information clearly and conspicuously, in plain language, and segregated from other disclosure information.²⁷ These disclosure items would include:

• The legal entity obligated to redeem 
• That the issuer, and not an intermediary, is responsible for redemption
• A link to the monthly reserve composition report
• All fees associated with purchasing or redeeming payment stablecoins

Risk Management

The Proposal would establish principles-based operational, compliance, and risk management standards that would be tailored to the business models and risk profiles of PPSIs.²⁸ The requirements would, in certain instances, track supervisory standards applicable to insured banks, while tailoring them to the unique features of stablecoin issuance. The Proposal would not mandate a specific governance architecture, but emphasizes that board accountability and independent oversight are essential supervisory expectations, consistent with traditional banking standards. Issuers must also demonstrate robust liquidity and concentration risk management practices, including monitoring compliance with reserve diversification requirements and maintaining operational capability to monetize reserves rapidly.

The Proposal envisions a targeted framework governing transactions with insiders and affiliates.²⁹ If adopted, these transactions could not be excessive or expose the PPSI to material financial loss and must be conducted on “market terms” and documented and reviewed by the board. The “market terms” requirement mirrors the standard applicable to covered transactions between banks and their affiliates under Section 23 of the Federal Reserve Act and Regulation W. In other words, transactions would need to be on terms and under circumstances that are substantially the same as, or at least as favorable to the PPSI as, those prevailing for comparable transactions with unaffiliated third parties.

Examination and Supervision

The proposed examination and reporting regime would closely parallel the OCC’s approach to other entities within its supervisory jurisdiction, while accounting for the narrower business model of PPSIs.³⁰ PPSIs would be examined and supervised by the OCC. The rule would require annual full-scope examinations, supplemented with weekly confidential data reports, quarterly financial condition reports, and annual AML certifications.³¹ The rule would also implement procedures for seeking OCC approval for any change in control of a PPSI.

Capital and Operational Backstop

The OCC also proposes minimum capital requirements for an initial de novo period of three years.³² During the de novo period, PPSIs must hold, at minimum, the greater of $5 million or the amount specified in an FQPSIs licensing or chartering conditions or specified by the OCC for SQPSIs. After the de novo period, PPSIs must maintain capital commensurate with the level and nature of all risks to which the PPSI is exposed.³³

The Proposal would adopt a tiered capital regime that is generally consistent with the capital elements for national banks and Federal savings associations under 12 CFR Part 3. Under the Proposal, minimum capital requirements must consist of common equity “Tier 1” capital and “Additional Tier 1” capital. Although the OCC’s capital framework for banks also permits Tier 2 capital elements, the OCC is not proposing to adopt Tier 2 capital elements for permitted payment stablecoin issuers.

Common equity Tier 1 capital would consist of common stock instruments (par value, if any, and related surplus), retained earnings, and any accumulated other comprehensive income, all as reported under GAAP. The common stock instruments would need to meet various proposed criteria. Additional Tier 1 capital would consist of instruments that meet a different set of proposed criteria, generally consistent with noncumulative perpetual preferred stock issuances that are classified as equity under GAAP.³⁴

Alternatively, the OCC is considering a simplified capital instrument framework for permitted payment stablecoin issuers. Under this framework, any balance sheet account that qualifies as equity under GAAP would qualify as a capital element, including common stock, retained earnings, accumulated other comprehensive income, and certain preferred stock. However, the simplified framework lacks additional requirements in the tiered framework that are intended to reduce the risk to stablecoin holders and ensure that the equity instruments are sufficiently loss absorbing.

PPSIs would also be required to maintain an operational backstop of highly-liquid assets sufficient to cover one year of operating expenses.³⁵ The proposed backstop assets would be independent of the de novo or ongoing capital requirements and from any assets held as reserve assets. The amount of the operational backstop would be calculated each quarter, based on the permitted payment stablecoin issuer’s total expenses as reported in the four most recent quarterly report. For de novo permitted payment stablecoin issuers, the initial requirement would be based on reasonable expense projections and adjusted each quarter based on actual amounts for that quarter.

Custody and Oversight of Ecosystem Participants

The Proposal implements Section 10 of the GENIUS Act and establishes the segregation, control, customer property, and safeguarding requirements applicable to custodians of stablecoin reserves, collateral stablecoins, and private keys.³⁶ Specifically, the Proposal would implement the GENIUS Act’s custody provisions by establishing a prudential framework governing the safekeeping of payment stablecoins, private keys, and reserve assets. The framework is broadly consistent with existing supervisory expectations for banking institutions providing crypto-asset safekeeping services and is organized around three core principles.³⁷

First, the Proposal would require a PPSI or custodian to demonstrate that it has exclusive control over the private keys (or equivalent access credentials) necessary to transfer payment stablecoins, such that no other party, including the customer, retains unilateral transfer capability. The Proposal would also require clear contractual delineation of the custodian’s role, including whether services are provided in a fiduciary or non-fiduciary capacity.

Second, customer assets would need to be clearly segregated so they are protected from the claims of the custodian’s creditors. Specifically, the Proposal would require clear segregation of customer payment stablecoins, reserve assets backing stablecoins, and the PPSI’s or custodian’s proprietary assets. If adopted, PPSIs and custodians would be required under the Proposal to maintain accurate books and records sufficient to identify each customer’s interest in the relevant digital assets and to reconcile on-chain balances with internal ledgers on a timely basis. It would also require clear, contractual delineation of the custodian’s role, including whether services are provided in a fiduciary or non-fiduciary capacity.

Third, the Proposal would require robust risk-management policies and procedures. Although the rule does not mandate a specific wallet architecture, it would require PPSIs and custodians to adopt key-management solutions appropriate to their risk profile and operational scale. Custody relationships involving payment stablecoins would remain fully subject to BSA and AML requirements, OFAC sanctions compliance, and suspicious activity monitoring and reporting requirements.

In sum, covered custodians would be required to segregate and separately account for covered assets, treat them as customer property, protect them from claims by custodian creditors, and maintain possession or control of them. And, although the Proposal recognizes that PPSIs may rely on sub-custodians or technology providers to perform certain safekeeping functions, PPSIs would have ultimate responsibility for third-party oversight of custodians, infrastructure providers, and other critical service providers.

Comment Period and Next Steps

The OCC’s Proposal reflects an effort to integrate stablecoin issuance into the federal banking supervisory framework while preserving the novel features of blockchain-based infrastructure. The breadth of the proposed requirements means that a wide range of market participants will need to assess their obligations and consider whether the Proposal as drafted serves their operational and compliance interests. Institutions should carefully evaluate the Proposal’s licensing requirements and ongoing prudential standards when assessing entry into the regulated payment stablecoin market.

Comments are due 60 days after publication in the Federal Register. Key areas for comment include:

• Diversification Standard: Whether a principles-based approach with a safe harbor or mandatory quantitative requirements should be adopted
• Single-Brand Restriction: Whether each PPSI should be limited to issuing only one brand of stablecoin, or whether white-label arrangements with multiple brands should be permitted 
• Prohibition on Unsafe or Unsound Practices: Whether to codify an explicit prohibition on unsafe or unsound practices to complement the OCC’s existing examination authority
• Overlapping Custody Requirements: How to manage potentially overlapping reserve custody obligations when different regulators implement GENIUS Act Section 10 differently for their respective supervised entities 
• Tokenized Reserve Assets: Whether the OCC should publish a public list of pre-approved tokenized reserve assets for transparency 
• Reserve Asset Exclusions: Whether stablecoin reserves should be excluded from asset thresholds that trigger different regulatory requirements (e.g., assessment fees or capital tier thresholds) 
• Codification of Self-Executing GENIUS Act Provisions: Whether the Act’s self-executing preemption provisions should be codified in OCC regulations for convenience and clarity

If you would like to discuss the OCC’s Proposal or determine whether to comment, please contact any of the authors of this Advisory or your usual firm contact.

© Arnold & Porter Kaye Scholer LLP 2026 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.