Implementing the GENIUS Act: The OCC’s Final Rule on the Issuance of Payment Stablecoin

On October 21, 2026, the Office of the Comptroller of the Currency (OCC) issued a final rule (Final Rule) implementing the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) for entities subject to OCC jurisdiction.¹ The Final Rule adopts new 12 C.F.R. Part 15 and amends Parts 3, 6, 8, and 19 of the OCC’s regulations, finalizing the notice of proposed rulemaking (Proposal)² discussed in our March 2026 Advisory. The Final Rule takes effect on January 18, 2027. Bank Secrecy Act (BSA), anti-money laundering (AML), and sanctions requirements are reserved for a separate rulemaking coordinated with the Treasury Department, and the OCC has indicated that it will closely monitor the industry as the statute and Final Rule take effect, signaling the possibility of future interpretive guidance on various aspects of the regulatory framework.

In announcing the Final Rule, Comptroller Gould described it as “a clear, practical framework for payment stablecoin innovation, with strong standards for reserve backing, redemption, and risk management.”³ The Final Rule generally retains the Proposal’s architecture but also reflects the OCC’s shift in posture toward a more flexible, principles-based approach in several notable areas, while adding new expectations around stress testing and liquidity. This Advisory summarizes the key elements of the Final Rule and highlights ongoing considerations for market participants as implementation of the GENIUS Act continues.

Permissible Activities

The Proposal would have limited PPSIs to eight enumerated activities that tracked the GENIUS Act’s list of permissible issuer activities.⁴ The Final Rule expands that list to eleven, also permitting PPSIs to hold nonpayment stablecoin digital assets as principal as needed to pay customer and network fees or to conduct ledger testing; to establish trust arrangements over reserve assets (including security interests) that benefit only holders and do not impair timely redemption or impede a receiver; and to manage FX risk.⁵ Under the Final Rule, supporting activities now expressly include “hiring third parties” to support the conduct of permissible activities, and the Final Rule also contains a new provision that effectively preapproves repurchase agreements involving Treasury bills with maturities of 93 days or less for purposes of the rehypothecation provision of the statute.⁶

These additions are in certain respects consistent with authority the OCC has clarified for national banks through recent interpretive guidance, including its confirmation that a national bank may hold crypto-assets as principal in amounts necessary to pay network fees for which it anticipates a reasonably foreseeable need and to test otherwise permissible crypto-asset platforms.⁷ The authorization for PPSIs to act as principal or agent with respect to payment stablecoin likewise parallels the OCC’s confirmation that a national bank may engage in riskless principal crypto-asset transactions with and on behalf of customers.⁸

Yield Prohibition 

Consistent with Section 4(a)(11) of the GENIUS Act, the Proposal would have prohibited a PPSI from paying a holder any form of interest or yield “solely in connection with the holding, use, or retention” of a payment stablecoin. The Proposal would also have established a rebuttable presumption that a PPSI violated this prohibition if (1) the PPSI had a contract, agreement, or other arrangement to pay interest or yield to an affiliate or “related third party,” and (2) that affiliate or related third party (or an affiliate of the related third party) had an arrangement to pay interest or yield to holders of the PPSI’s payment stablecoin. A “related third party” would have included any person offering to pay interest or yield to holders as a service (e.g., a yield-as-a-service provider) and any person on whose behalf, or under whose branding, the PPSI issues payment stablecoins (e.g., a white-label brand partner).

The Final Rule, however, eliminates both the proposed presumption and the “related third party” construct for domestic and foreign issuers alike. The OCC explained that, “[b]ecause payment stablecoins are a nascent market,” a rebuttable presumption is not appropriate “at this time.”⁹ The OCC added that the proposed presumption could have been both over- and under-inclusive, and it noted the rebuttal process would have imposed a burden without commensurate benefit.¹⁰ The Final Rule also does not define “interest” or “yield” and does not adopt safe harbors; instead, the OCC will evaluate arrangements on a case-by-case basis through the agency’s processing of PPSI applications and supervision activities. The OCC “anticipates” that, as the market develops, “it will gain sufficient experience with identifying prohibited transactions to allow it to propose a rulemaking clarifying the yield prohibition that does not have the disadvantages noted above.” ¹¹

Also of note, as outlined in the preamble to the Final Rule, the OCC indicated that certain indirect payments could violate the statute’s yield prohibition and confirmed that the prohibition falls within the scope of the OCC’s anti-evasion authority under Section 4(h)(1) of the GENIUS Act, which directs the primary federal payment stablecoin regulators to issue regulations necessary to carry out Section 4 “and to prevent evasion thereof.”¹²

Reserve Requirements, Diversification, and Liquidity Management

The Proposal would have required PPSIs to maintain reserves with a “total fair value” at or above outstanding issuance value and would have permitted excess reserves to be withdrawn only monthly, after the composition report was published and examined. The Final Rule introduces and defines the term “reserve asset value” (fair value net of associated liabilities)¹³ and replaces the monthly restriction with a requirement to confirm, through due diligence, that the 1:1 test will hold at the time of withdrawal. PPSIs must also ensure their portfolios can support timely redemption in normal and adverse conditions, “including, to the extent necessary, maintaining a buffer,” and an issuer “may need” reserves above the quantitative minimums and 1:1.¹⁴

With respect to reserve asset diversification requirements, the Proposal set forth two possible alternatives: a safe-harbor option or mandatory limits. The Final Rule instead adopts a single hybrid standard that pairs principles-based diversification and concentration duties with two bright-line requirements: at least 5% of reserves must be maintained in demand deposits, share accounts payable on demand, or Federal Reserve balances, and a PPSI’s exposure to any single counterparty must be limited to no more than 40% of its reserve assets.¹⁵ That limit excludes U.S. Government exposures, centrally cleared repos, and “appropriate custodians” that have committed to comply with the GENIUS Act’s custody requirements and are subject to ongoing due diligence.¹⁶

Redemption

The Proposal would have defined “timely redemption” as redemption occurring within two business days; however, the Proposal also provided that in the event that redemption demands exceeded 10% of outstanding issuance value in any 24-hour period, the OCC would have automatically extended the “timely redemption” period to seven calendar days. Responding to concerns that an automatic gate could accelerate a run, the Final Rule retains the two-business-day standard but eliminates the proposed gate.¹⁷ A PPSI must instead notify the OCC within 24 hours if redemption requests exceed 10% of any brand’s outstanding issuance value in a 24-hour period.¹⁸ It may then request an extension, which the OCC may grant or deny and expects to use sparingly, and the OCC may separately impose discretionary limits.¹⁹

The Final Rule also clarifies the redemption timeline.²⁰ The obligation begins once an order is received and, if the issuer’s onboarding procedures are reasonably designed not to unduly delay onboarding, the customer has been onboarded and other legal conditions are met; redemption “occurs” when the outgoing transfer is initiated or the account is credited. The OCC will not require a redemption that would cause a violation of other applicable law, such as compliance with applicable sanctions regimes or AML requirements.²¹

Risk Management, Recordkeeping, Reporting, and Disclosures

The Proposal would have set general internal control, audit, interest rate, insider-transaction, and IT security standards, with annual full-scope examinations and an 18- to 36-month cycle for smaller issuers. The Final Rule details PPSIs’ risk-management obligations, which include requiring monetization analyses against various redemption scenarios, regular stress testing (including significant rising-rate scenarios), and that PPSIs be able to demonstrate their ability to access and monetize reserve assets as necessary, including under stressed conditions.²² Under the Final Rule, issuers of non-USD payment stablecoin must hedge residual FX risk, without speculative positions, and the issuer must first obtain OCC approval before engaging in FX risk management.²³ Insider and affiliate transactions are now tested under the Final Rule “alone or in the aggregate,” and internal controls must include dual controls.

Under the Final Rule, the OCC will conduct a full-scope examination of PPSIs at least once during each 12-month period, unless the PPSI qualifies for an extended examination schedule (which the Final Rule reduced from the proposed 18 to 36 months down to 18 to 24 months).²⁴ The requirements to qualify for an extended examination under the Final Rule are similar to those under the Proposal, except (i) the Final Rule now aggregates a PPSI’s outstanding issuance value together with any affiliated PPSIs to determine if the PPSI’s value is under $1 billion, and (ii) the Final Rule removed the proposed trading-volume prong.²⁵ After the initial board-level certification, annual AML and sanctions certifications may be given by the BSA officer or a board committee.²⁶ Holder disclosures under the Final Rule must now state that the payment stablecoin is not legal tender, a deposit, or government-guaranteed or insured, and composition reports must be prepared by “class or brand” where the different classes or brands are issued by distinct issuers, so multibrand issuers should plan reporting on a perbrand basis.

Capital and Operational Backstop

The Proposal would have (i) set minimum de novo capital requirements at the greater of $5 million or the applicable licensing condition, (ii) required that capital consist of common equity “Tier 1” capital and “Additional Tier 1” capital under the OCC’s capital framework for national banks under 12 CFR Part 3, and (iii) measured the 12-month operational backstop requirement at quarter-end. The Final Rule instead imposes a total GAAP equity requirement, less goodwill, intangibles, deferred tax assets, and equity-funded backstop assets, with an express ongoing $5 million minimum.²⁷ Up to 50% of the backstop may be funded with subordinated, unsecured, nonaffiliate “operational backstop debt” with at least a five-year maturity, and, with OCC approval, one-time expenses may be excluded from the calculation.

In exchange, both requirements now apply “at all times” under the Final Rule, rather than only at quarter-end as the Proposal would have provided. A PPSI must notify the OCC within 24 hours of a breach and publicly report quarterly compliance, and the OCC may restrict issuance before quarter-end. The OCC may allow an issuer that draws down its backstop for a temporary disruption to continue operating if the issuer submits, within seven days, a viable plan to restore compliance within 90 days.²⁸

Finally, whereas the Proposal would have allowed uninsured national trust banks to elect the PPSI capital framework on 30 days’ notice, the Final Rule requires prior OCC approval, and the OCC will approve or deny within 60 days,²⁹ which national trust banks should build into their timelines. The Final Rule also retains the option for uninsured national trust banks to comply with the Final Rule’s capital framework in lieu of the capital requirements of 12 C.F.R. Part 3.³⁰

Foreign Issuers, State Issuers, Licensing, and Custody

The Proposal would have required foreign issuers to hold reserves “in United States financial institutions” sufficient for U.S. customers, without defining what constitutes sufficiency for this purpose. The Final Rule requires reserves at eligible U.S.-organized institutions and defines sufficiency through four pathways: (A) fewer than 50% U.S. holders by value and U.S. reserves of at least 50% of outstanding issuance; (B) substantially all reserves in the United States; (C) U.S. reserves capable of supporting U.S. redemptions under stress; or (D) an OCC-approved proposal. For state issuers, under the Final Rule, the $10 billion transition threshold is now measured on a “total consolidated” basis, transitioned issuers may return to state supervision below that threshold, and the unusual-and-exigent-circumstances factors now include secondary-market price swings, redemption failures, and significant unanticipated losses.³¹

The Final Rule also refines the licensing framework.³² Under the Final Rule, the OCC may conditionally approve applications and return those still incomplete 60 days after a deficiency notice, and a new factor asks whether the applicant’s structure “adequately addresses run risks.” With respect to payment stablecoin custody requirements, “covered assets” are limited to payment stablecoin reserves; private keys used to issue payment stablecoin; and payment stablecoins used as collateral, where a covered custodian has actual knowledge that such payment stablecoins are being used as collateral; in each case only with respect to stablecoins offered, sold, or made available to persons in the United States.³³ The requirement that the custodian have knowledge that the payment stablecoins are being used as collateral is a significant addition under the Final Rule, which could decrease the volume of payment stablecoins being used as collateral that qualify as covered assets. 

Finally, omnibus subcustody is permitted with safeguards, and the self-custody exclusion applies only where the provider neither controls nor holds itself out as controlling the private keys and does not provide or hold itself out as providing custodial services.

Outlook

The Final Rule takes effect January 18, 2027. The OCC has stated that it will separately announce when it will begin accepting and processing applications and waiver requests from prospective PPSIs, and it has issued guidance on waivers and application submissions.³⁶ The OCC has also published for comment a revised set of weekly and quarterly reporting forms and instructions for PPSIs and registered foreign payment stablecoin issuers, which revise the forms first proposed in June 2026 to respond to comments and conform to the Final Rule.³⁷ Prospective applicants should review these materials now, both to prepare application packages and to build the data infrastructure needed for ongoing weekly and quarterly reporting. Applicants seeking safe-harbor waiver relief must have a substantially complete application pending by January 18, 2027, and given the 120-day clock and new 60-day return rule, early filing is advisable. 

If you would like to discuss the Final Rule or its implications, 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.