OCC proposed rulemaking implementing the GENIUS Act

On February 25, 2026, the Office of the Comptroller of the Currency (OCC) issued a notice of proposed rulemaking (Proposed Rule) to implement the Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act).¹ The GENIUS Act, enacted on July 18, 2025, established a regulatory framework for the issuance of payment stablecoins.² The GENIUS Act generally prohibits (i) any person other than a permitted payment stablecoin issuer from issuing a payment stablecoin in the United States³ and (ii) digital asset service providers from offering or selling a payment stablecoin to a person in the United Stated unless the issuer is a permitted payment stablecoin issuer or a foreign payment stablecoin issuer that meets certain requirements.^4,5

The Proposed Rule sets out and seeks comment on the regulations that would apply to (i) activities related to payment stablecoins and (ii) custody activities of certain permitted payment stablecoin issuers, namely, of (1) national banks and federal savings associations and their respective subsidiaries, (2) federal branches and their subsidiaries; (4) foreign payment stablecoin issuers (FPSI); (5) nonbank entities that seek to be or are approved as federal qualified payment stablecoin issuers; and (6) state qualified payment stablecoin issuers subject to the OCC’s regulatory or enforcement authority.

This summary of the Proposed Rule is organized as follows: Part I summarizes permitted and prohibited activities of permitted payment stablecoin issuers under the Proposed Rule and Part II summarizes the proposed requirements with respect to reserve assets and redemption requirements. Part III addresses the Proposed Rule’s provisions related to risk management, required reporting and supervisory examinations. Part IV addresses the Proposed Rule’s treatment of custodial and safekeeping activities with respect to covered assets. Part V summarizes the capital requirements and operational backstop requirement contemplated by the Proposed Rule. Part VI addresses the Proposed Rule’s requirements with respect to applications to become licensed by the OCC as a permitted payment stablecoin issuer.

The Proposed Rule comes on the heels of proposed rulemakings by the Federal Deposit Insurance Corporation (FDIC),⁶ which proposed rules addressing the application process for FDIC-supervised institutions and their subsidiaries, and by the National Credit Union Association,⁷ which proposed rules addressing the application process for federally insured credit unions and their subsidiaries.

The GENIUS Act will go into effect on the earlier of January 18, 2027, or the date that is 120 days after the primary regulators issue final regulations to implement the GENIUS Act.

The Proposed Rule is intended to cover all of the regulations that the OCC is mandated to promulgate pursuant to the GENIUS Act other than those related to the Bank Secrecy Act, anti-money laundering, and Office of Foreign Assets Control sanctions, which will be addressed in a separate rulemaking. Comments on the Proposed Rule are due no later than May 1, 2026.

I. Activities of PPSIs subject to the OCC’s jurisdiction

The Proposed Rule uses the term “permitted payment stablecoin issuers” (PPSIs) to mean entities that are subject to the OCC’s jurisdiction as opposed to the broader definition of the same term in the GENIUS Act. In the Proposed Rule, a PPSI means a person formed in the United States that is a (1) subsidiary of an insured national bank or federal savings association that has been approved by the OCC to issue payment stablecoins, (2) a federal qualified payment stablecoin issuer or a (3) state qualified payment stablecoin issuer subject to the OCC’s regulatory or enforcement authority. A federal qualified payment stablecoin issuer means (a) a nonbank entity, other than a state qualified payment stablecoin issuer; (b) an uninsured national bank that is chartered by the OCC pursuant to title LXII of the Revised Statutes; or (c) a federal branch, in each case that has received the OCC’s approval to issue payment stablecoins.

Permitted Activities. Consistent with permitted activities outlined in the GENIUS Act, the Proposed Rule would allow PPSIs to engage in the following activities:

• issuing and redeeming payment stablecoins;⁸
• managing the reserves related to the issuance or redemption of payment stablecoins, including purchasing, selling, holding reserve assets or providing custodial services for reserve assets;⁹
• providing custodial or safekeeping services for payment stablecoins, required reserves or private keys of stablecoins;¹⁰
• any other activities that directly support any of the foregoing activities;¹¹
• assessing fees that are associated with the purchase or redemption of payment stablecoins;¹²
• acting as principal or agent with respect to any payment stablecoin;¹³ and
• paying fees to facilitate customer transactions (e.g., network or “gas” fees).¹⁴

Prohibited Activities. The Proposed Rule would also prohibit PPSIs from engaging in certain activities, including:

• using any combination of terms relating to the United States government, including “United States,” “United States Government” and “USG,” in the name of a payment stablecoin;¹⁵
• marketing a payment stablecoin in such a way that a reasonable person would perceive the payment stablecoin to be legal tender, issued, guaranteed or approved by the United States;¹⁶
• directly or through implication representing that payment stablecoins are backed by the full faith and credit of the United States, guaranteed by the United States, or subject to federal deposit insurance or federal share insurance;¹⁷
• paying the holder of any payment stablecoin any form of interest or yield (whether in cash, tokens, or other consideration) solely in connection with the holding, use or retention of such payment stablecoin;¹⁸
• pledging, rehypothecating or re-using any reserve assets, either directly or indirectly, except (i) to satisfy margin obligations in connection with investments in certain permitted reserves; (ii) to satisfy obligations associated with the use, receipt or provision of standard custodial services; or (iii) to create liquidity to meet reasonable expectations of requests to redeem payment stablecoins, such that reserves in the form of Treasury bills with a maturity of 93 days or less may be sold as purchased securities in repurchase agreements, provided that either the repurchase agreements are cleared by an SEC-registered clearing agency or the issuer receives prior approval from the OCC;¹⁹ and
• engaging in any activity the OCC determines is an evasion of the requirements of Section 4 of the GENIUS Act or the Proposed Rule.²⁰

To prevent attempts to evade the prohibition of the payment of interest or yield to the holder of a payment stablecoin solely in connection with the holding, use or retention of such payment stablecoin, there would be a presumption that an issuer is in violation if the issuer has a contract, agreement or other arrangement with an affiliate or a “related third party” to pay interest or yield to the affiliate or related third party and such affiliate or related third party (or an affiliate thereof) in turn has a contract, agreement or other arrangement to pay interest or yield to the payment stablecoin holder solely in connection with the holding, use or retention of such payment stablecoin.²¹ Related third parties include any person paying interest or yield to payment stablecoin holders as a service and any person that has entered a white-label relationship with the issuer.²² The presumption may be rebutted if the issuer submits written materials that demonstrate to the OCC’s satisfaction that the contract, agreement or other arrangement does not violate and is not an attempt to evade the prohibition.

In addition to the prohibited activities identified above, the OCC has requested comments on whether PPSIs should be prohibited from issuing more than one brand of payment stablecoin.²³ The OCC acknowledged that allowing a PPSI to issue multiple brands of stablecoins could facilitate a broader range of stablecoins in the market and allow partners to leverage the experience and expertise of an issuer through co-branding. However, the OCC expressed concern that this practice could create uncertainty about reserve assets and increase the risk of a “run” on the stablecoin. In connection with the contemplated restriction, the process for approving applications may be streamlined for affiliates of PPSIs that have already been approved so that multiple affiliated issuers could benefit from shared services and a common operational framework while maintaining legal separation of the entities in the event an issuer becomes insolvent.

The OCC is also considering whether to generally prohibit PPSIs from engaging in “unsafe or unsound practices” to afford the OCC more freedom to address practices that could “undermine public confidence in PPSIs and the financial system more generally.”²⁴

II. Reserve assets; redemption requirements

A. Reserve assets

The GENIUS Act requires a PPSI to maintain identifiable reserves backing its outstanding payment stablecoins on at least a one-to-one basis. The Proposed Rule would require that reserve assets: (i) be identifiable; (ii) be segregated from and not commingled with other assets owned or held by the PPSI; (iii) have a total fair value that equals or exceeds the outstanding issuance value of the PPSI at all times; and (iv) be held directly or within the custody of an eligible financial institution.²⁵

PPSIs would be required to maintain appropriate records to ensure documented ownership and legal entitlement to the individual reserve assets,²⁶ and to maintain appropriate operational capabilities, internal controls, policies and safeguards to ensure the stablecoins are always backed by reserves on at least a one-to-one basis.²⁷ The outstanding issuance value is based on the total consolidated par value of all of a PPSI’s stablecoins, not the fair value of the outstanding issued payment stablecoins. This means that if the fair value of the payment stablecoin decreases, the PPSI will nevertheless be required to retain reserve assets with a total fair value that equals or exceeds the par value of the outstanding payment stablecoins.²⁸ In its request for comment, the OCC inquired whether a buffer or other measure to ensure PPSIs are able to maintain the minimum reserves should be imposed or whether guidance should be provided on what level of buffer is generally appropriate as a matter of prudent risk management.²⁹

PPSIs must demonstrate the operational capability to access and monetize the identifiable reserve assets, commensurate with the PPSI’s risk profile and business model.³⁰ To comply with this requirement, a PPSI must be able to demonstrate its ability to quickly and at short notice monetize all types of reserve assets it maintains to meet redemption requests.³¹ To do so, some PPSIs may need to periodically conduct actual monetization transactions, particularly if the PPSI has complicated operations, a complex organizational structure, or is particularly dependent on certain monetization channels or the ability to monetize particular assets. Periodic test transactions also minimize the risk of negative signaling during financial stress, reducing public concerns that could contribute to a run on the PPSI’s stablecoins.

The Proposed Rule would allow PPSIs to withdraw excess reserve assets only after the monthly examination and certification required by Section 4(a)(3) of the GENIUS Act.³² A PPSI could withdraw any surplus reserve assets in excess of the outstanding issuance value, calculated and reported as of the end of the prior month, only upon the publication of that month’s public disclosure, which is due at the end of the subsequent month. Further, a PPSI could only make withdrawals if the remaining reserve assets were at least equal to the current outstanding issuance value at the time of withdrawal.³³

Reserve assets may comprise only the following:³⁴

1. United States coins and currency or money standing to the credit of an account with a Federal Reserve Bank;
2. funds held as deposits or insured shares payable upon demand at an insured depository institution, subject to any limitation established by the FDIC and the National Credit Union Administration;
3. Treasury bills, Treasury notes or Treasury bonds with a remaining maturity of 93 days or less;
4. money received under repurchase agreements, with the PPSI acting as a seller of securities and with a no longer than overnight maturity, that are backed by Treasury bills with a maturity of 93 days or less;
5. reverse repurchase agreements, with the PPSI acting as a purchaser of securities and with a no longer than overnight maturity, that are collateralized by Treasury bills, Treasury notes or Treasury bonds on a no longer than overnight basis, subject to overcollateralization in line with standard market terms, that are tri-party, centrally cleared through an SEC-registered clearing agency, or bilateral with a counterparty that the PPSI has determined to be adequately creditworthy even in the event of market stress;
6. securities issued by a registered investment company or other registered government money market fund invested solely in the underlying assets specified in (1)-(5) above;
7. any other similarly liquid federal government-issued asset approved by the OCC and the state payment stablecoin regulator, if applicable;³⁵ or
8. any of the reserves specified above, except repurchase or reverse repurchase agreements, in tokenized.

The GENIUS Act requires the OCC to issue regulations addressing reserve asset diversification, including deposit concentration at banking institutions and interest rate risk management standards tailored to the business model and risk profile of PPSIs without exceeding standards sufficient to ensure the ongoing operations of PPSIs. The OCC is considering and seeking comments on two alternative options:

• Option A relies on a principles-based general requirement that PPSIs maintain reserve assets that are sufficiently diverse (both in types of reserve assets maintained and in number of eligible financial institutions holding the reserve assets) to manage potential credit, liquidity, interest rate and price risks.³⁶ Factors such as the number of parties that redeem directly with the PPSI, the volume of redemptions, and the number and nature of the blockchains on which a payment stablecoin is traded could all increase the complexity of the PPSI’s operations and weigh in favor of maintaining multiple different pools of reserve assets. PPSIs would be required to measure and manage the risk that concentrating reserve assets at a small number of eligible financial institutions may impair their ability to satisfy redemption demands if individual eligible financial institutions are unable to return, or if there is a delay in returning, reserve assets. PPSIs would further be required to “look through” any sub-custodial relationships to ensure reserve assets are custodied at a sufficiently diverse number of eligible financial institutions for compliance. Under Option A, a PPSI may rely on an optional safe harbor if certain qualitative requirements (as described under Option B) are met.³⁷
• Option B would impose qualitative requirements that would be mandatory for all PPSIs.³⁸ A PPSI would be required to maintain on each business day: (i) at least 10% of its required reserve assets as deposits or insured shares payable upon demand or money standing to the credit of an account with a Federal Reserve Bank;³⁹ (ii) at least 30% of its reserve assets as deposits or insured shares payable upon demand, money standing to the credit of an account with a Federal Reserve Bank, or amounts receivable and due unconditionally within five business days on pending sales of reserve assets, maturing reserve assets, or other maturing transactions;⁴⁰ (iii) no more than 40% of its reserve assets at any one eligible financial institution, whether as deposits or insured shares at any one insured depository institution, securities custodied at any one eligible financial institution, bilateral reverse repurchase agreements with any counterparty, or through other exposures;⁴¹ (iv) no more than 50% of the amount provided in sub-item (i) above at any one eligible financial institution; and (v) reserve assets with a weighted average maturity of no more than 20 days.⁴²

The Proposed Rule relies heavily on liquidity requirements to instill public confidence and mitigate the risk that the payment stablecoins will be unable to maintain a stable value and result in a run during times of financial stress.⁴³ In drafting the Proposed Rule, the OCC used SEC Rule 2a-7, which governs the investments of money market funds and imposes similar diversification requirements (such as minimum daily and weekly liquidity), as a reference.⁴⁴ However, the Proposed Rule diverges in certain respects based on inherent differences between the two, such as reserve asset composition. In its request for comments, the OCC asked whether PPSIs should be required to maintain a minimum amount of cash or cash equivalents in their reserve assets akin to the requirements for money market funds in SEC Rule 2a-7 or short-term investment funds in 12 CFR 9.18(b)(4)(iii).⁴⁵ Alternatively, the OCC questioned whether conservative liquidity requirements are necessary and raised the possibility of scaling back some of the liquidity requirements in favor of increased capital or buffer requirements.⁴⁶

In its requests for comment, the OCC raised the possibility of implementing measures to spread insured stablecoin deposits throughout the banking system and questioned whether reserve diversification requirements that encourage diffusion of deposits would cause risks to the banking system, such as increasing run risks at banks or replacing more stable deposits with deposits that are more likely to be withdrawn quickly and in large volumes.⁴⁷ The OCC further asked whether the Proposed Rule would reduce the number of deposits maintained in the United States banking system and therefore affect the ability of banks to lend, how such concerns could be mitigated, and whether a minimum percent of reserve assets should be required to be in the form of deposits to offset potential reductions in overall deposit levels.⁴⁸

The Proposed Rule would also require a PPSI with an outstanding issuance value of $25 billion or more to maintain at least 0.5% of its reserve assets in the form of insured deposits or insured shares at an insured depository institution each business day, up to a cap of $500 million.⁴⁹

Under the Proposed Rule, a PPSI would be required to publish on its website at the end of each month the composition of its reserves as of the end of the prior month.⁵⁰ This report must include the total number of outstanding payment stablecoins as well as the fair value and composition of the reserves (including the average tenor and geographic location of custody of each category of reserve instruments). The information disclosed in the previous month-end report must be examined by a registered public accounting firm each month.⁵¹ The examination of the prior monthly report would be required to be published on the PPSI’s website at the same time as the reserves report. In addition, the PPSI’s CEO and CFO would be required to submit a certification to the OCC attesting to the accuracy of the monthly report.

If a PPSI’s reserve assets were to fall below the required minimum, the Proposed Rule provides that the OCC must be notified, and the PPSI would be barred from issuing new payment stablecoins until the shortfall is remedied, except as necessary to facilitate a transfer of payment stablecoins from one distributed ledger to another and provided that the net outstanding issuance value does not increase.⁵² If a PPSI fails to meet the reserve asset requirement for 15 consecutive days, it would be required to begin liquidating its reserve assets and redeeming its outstanding payment stablecoins without charging a redemption fee to its customers. If at any time the OCC determines a PPSI has not demonstrated that it meets the reserve asset requirements, the OCC may require the PPSI to submit a plan describing how it will attain compliance and the timeline for such plan.⁵³ The OCC could also order the PPSI to initiate redemption of all outstanding payment stablecoins if the OCC determined there is a significant risk that the PPSI would be unable to attain compliance within a reasonable period.

B. Redemption requirements

A PPSI must publicly disclose its redemption policy, including at a minimum the following information required by the Proposed Rule:⁵⁴

1. a timeframe in which the PPSI will redeem payment stablecoins and the timeframe under which the issuer is required to redeem payment stablecoins, which may not exceed two business days following the date of the requested redemption;⁵⁵
2. a statement that any discretionary limitations on timely redemptions can only be imposed by the OCC, or in the case of a state qualified payment stablecoin issuer, by the OCC, the Board of Governors of the Federal Reserve System, or the state payment stablecoin regulator, as applicable;⁵⁶
3. a statement explaining the scenarios when the redemption period may be extended;⁵⁷
4. a statement with clear instructions on how a payment stablecoin holder can redeem a payment stablecoin, including a link to the website(s) where a customer can redeem the payment stablecoin;⁵⁸ and
5. the minimum number of payment stablecoins, if any, that the PPSI will redeem, provided that the issuer must redeem any number greater than or equal to one payment stablecoin, subject to appropriate customer screening and onboarding.⁵⁹

With respect to the scenario in which the redemption period may be extended, the Proposed Rule contemplates that the period for timely redemption will be extended to seven calendar days if a PPSI faces redemption demands in excess of 10% of its outstanding issuance value in a single 24-hour period.⁶⁰ This extension is non-discretionary and a PPSI may only redeem any of the outstanding or subsequent redemption requests prior to the seven-calendar-day period if the OCC determines that the PPSI has the ability to redeem sooner in an orderly fashion and through a fair and transparent process or the OCC otherwise provides notice to the PPSI that the extended redemption period no longer applies. The Proposed Rule provides that the OCC, may in its discretion, extend the timely redemption described in proposed section 15.12(b)(1) or (c)(1), as applicable, if the OCC determines that the PPSI poses a threat to safety and soundness, financial stability or such an extension is otherwise in the public interest.⁶¹

According to the Proposed Rule, a PPSI must also publicly, clearly and conspicuously disclose in plain language and in format that is readily noticeable to customers, readily understandable by customers, and segregated from other information:

• the name of the PPSI;
• that the PPSI is the entity that is obligated to convert, redeem, or repurchase the payment stablecoin for a fixed amount of monetary value;
• the link to the monthly reserves report; and
• all fees associated with purchasing or redeeming payment stablecoins.⁶²

III. Risk management and required reporting; supervisory examinations

The GENIUS Act provides that the OCC must issue regulations implementing appropriate operational, compliance and information technology risk management principles-based requirements and standards that are tailored to the business model and risk profile of PPSIs and are consistent with applicable law.⁶³

The Proposed Rule requires that PPSIs establish internal controls and information systems that are appropriate for the size and complexity of the PPSI and the nature, scope and risk of its activities.⁶⁴

According to the Proposed Rule, the internal controls and information systems must provide for:

• an organizational structure with appropriate segregation of duties and an internal control structure that establishes clear lines of authority and responsibility for monitoring adherence to established policies;
• effective risk assessment;
• timely and accurate financial, operational, and regulatory reporting;
• adequate procedures to safeguard, manage, control, and monetize assets, including reserve assets; and
• compliance with applicable laws and regulations.⁶⁵

The Proposed Rule also requires PPSIs to maintain an internal audit system that provides for (i) adequate monitoring of the system of internal controls through an internal audit function, or for a PPSI whose size, complexity or scope of operations does not warrant a full scale internal audit function, a system of independent reviews of key internal controls; (ii) independence and objectivity; (iii) qualified persons responsible for the audit function; (iv) adequate independent testing and review of internal controls and information systems and verification of published information and regulatory filings; (v) adequate documentation of tests and findings and any corrective actions; (vi) verification and review of management actions to address deficiencies; and (vii) review by the institution’s audit committee or board of directors.⁶⁶

The Proposed Rule includes the following requirements with respect to risk management:

A PPSI must manage interest rate risk in a manner appropriate to its size and complexity and provide for periodic reporting to management and the board of directors regarding interest rate risk with adequate information for management and the board of directors to assess the level of risk.⁶⁷

A PPSI’s “asset growth must be prudent and commensurate with [a PPSI’s] risk management capabilities, operational capacity and staffing,” but the OCC notes that there are “no hard limits” for how quickly a PPSI may grow.⁶⁸

A PPSI must evaluate and monitor earnings and ensure that earnings are sufficient to support operations and maintain the capital levels. The OCC noted that “[i]t may be particularly important for permitted payment stablecoin issuers to evaluate the volatility and sustainability of earnings, since changes in short-term interest rates could have sudden impacts on permitted payment stablecoin issuer earnings.”⁶⁹

With respect to transactions between a PPSI and its affiliates, a PPSI would be required to ensure that transactions between the PPSI and insiders or affiliates: (1) are not excessive and do not pose significant risks of material financial loss; (2) are conducted on terms that are the same or at least as favorable to the PPSI as those prevailing at the time for comparable transactions with or involving non-insiders or non-affiliates (or in the absence of comparable transactions, are offered on terms and under circumstances that, in good faith would be offered to, or would apply to non-affiliates or non-insiders); and (3) are appropriately documented and reviewed by the board of directors.⁷⁰

The Proposed Rule requires the PPSI to oversee third-party service providers by exercising appropriate due diligence in selecting service providers, by requiring the service providers by contract to implement appropriate measures designed to meet the requirements of the OCC’s payment stablecoin regulations and, as appropriate, by monitoring its service providers to confirm they have satisfied their obligations under the OCC’s payment stablecoin regulations.⁷¹

A. Information technology and security program

According to the OCC’s Proposed Rule, the PPSI’s board of directors or an appropriate board committee must approve an information security and risk control program and the board is responsible for overseeing the development, implementation, and maintenance of the program, including the appointment of a qualified Information Technology and Security Officer.⁷² The elements of the program that would be required by the Proposed Rule include:

1. an inventory and classification of assets, processes and sensitivity of data;
2. controls supporting and safeguarding sensitive information and processes;
3. evaluation, validation and reporting processes to ensure that key information technology systems and controls, including smart contracts, are operating as intended;
4. periodic independent testing; and
5. a comprehensive and effective incident identification and assessment process and incident response program.⁷³

A PPSI must develop, implement, and maintain appropriate measures to ensure secure handling of digital assets, including private key management, backup, and recovery incorporating: (i) relevant technical, operational, strategic, market, legal and compliance considerations relating to each digital asset and its underlying ledger; and (ii) material developments specifically related to supported digital assets and their underlying ledgers.⁷⁴

The program must include measures to maintain operational resilience and ensure continuity of operations. The OCC noted in this connection that PPSIs should anticipate operational issues that may arise with burning and minting stablecoins and PPSIs should conduct due diligence before supporting new distributed ledgers.⁷⁵

The program is also expected to effectively manage more traditional concerns about security and confidentiality, integrity of stored records, and unauthorized access.⁷⁶ The Proposed Rule also sets out requirements for when and how PPSIs would be required to respond to incidents of unauthorized access to sensitive customer information and notify customers.⁷⁷

B. PPSI Reporting

The GENIUS Act sets out a broad reporting mandate for PPSIs to deliver information to their appropriate primary federal payment stablecoin regulator on their financial condition, systems for managing financial and operating risks, and compliance with the GENIUS Act, the Bank Secrecy Act and sanctions laws.⁷⁸ The OCC’s Proposed Rule mirrors statutory requirements related to efficiency, duplication of efforts, and burdensome disclosure obligations as part of PPSI reporting.

The Proposed Rule would require that PPSIs deliver a detailed quarterly report on their financial condition that will be disclosed publicly as well as confidential weekly reports. The weekly reports are focused on market activities involving stablecoin issuances and issuers, and will include information regarding issuance and redemption, trading volume and reserve assets as well as more detailed descriptions of the blockchains the payment stablecoin is listed on, outstanding issuance value, secondary market trading, price movement redemption volume and times and other relevant information.⁷⁹ The OCC believes that these more frequent reports will allow the OCC to understand PPSIs’ operations and the risks that emerge from their business model, to tailor their risk-based exams, and to identify and respond to emerging novel and financial stability risks. The OCC also believes that information to be provided via weekly reports is currently tracked by stablecoin issuers.⁸⁰

The quarterly reporting requirements in the Proposed Rule mirror the quarterly statements of financial condition that national banks and federal savings association provide to the federal banking agencies through their Call Reports and would include disclosure of the PPSI’s income statement, expenses, balance sheet, reserves, changes in equity, investments, capital, outstanding issuance value and assets under custody. The OCC also proposes to require that each quarterly report of financial condition includes a declaration from the PPSI’s Chief Financial Officer, or the individual performing an equivalent function, that the report is true and correct to the best of their knowledge and belief. The correctness of the quarterly report of condition would also be required to be attested to by the signatures of the directors and senior management of the PPSI, other than the officer making such declaration, with the attestation stating that the report has been examined by them and to the best of their knowledge and belief is true and correct.⁸¹

The Proposed Rule requires that not later than 180 days after the approval of an application and on an annual basis thereafter, a PPSI must submit to the OCC a certification by its board of directors that the PPSI has implemented anti-money laundering and economic sanctions compliance programs that are reasonably designed to prevent the PPSI from facilitating money laundering for cartels and organizations designated as foreign terrorist organizations under section 219 of the Immigration and Nationality Act (8 U.S.C. 1189) and the financing of terrorist activities.

PPSIs that are not subject to SEC’s periodic reporting requirements, but have an outstanding issuance value of more than $50 billion will be required to prepare and file an audited annual financial statement in accordance with GAAP.⁸²

C. Supervisory examinations

The OCC is authorized under the GENIUS Act to carry out supervisory examinations to assess

• the nature of their operations and the financial condition of the PPSI;
• the financial, operational, technological, compliance, and other risks associated within the PPSI that may pose a threat to the safety and soundness of the PPSI or the stability of the financial system of the United States;
• and the systems of the PPSI for monitoring and controlling the risks.⁸³

The Proposed Rule provides that generally a full-scope exam will be conducted each 12-month period.⁸⁴ However, a PPSI that has an outstanding issuance value of less than $1 billion or less than $25 billion in total monthly trading volume, is in compliance with all reserve requirements and reporting requirements, is not subject to a formal enforcement proceeding or order, and was not acquired during the preceding 12-month-period when a full examination would have been required, could be examined less frequently, with an 18-36 month cadence stipulated in the Proposed Rule.⁸⁵ The Proposed Rule makes clear that the OCC may conduct examinations of PPSIs as frequently as the OCC deems necessary, including examinations of a limited scope.⁸⁶

IV. Custodial and safekeeping services for covered assets

The GENIUS Act authorizes only certain entities to engage in the business of providing custodial or safekeeping services for payment stablecoins, reserve assets, and other “covered assets.”⁸⁷ A person carrying on that business must be subject to the supervision or regulation of a primary federal payment stablecoin regulator,⁸⁸ the Securities and Exchange Commission, the Commodity Futures Trading Commission or a state bank or credit union supervisor.

The custody provisions of the Proposed Rule apply to the following entities, called “covered custodians,”⁸⁹ to the extent they provide custodial or safekeeping services for “covered assets”: national banks, federal savings associations, federal branches, a subsidiary of an insured national bank or Federal savings association that has been approved to issue payment stablecoins, federal qualified payment stablecoin issuers, and state qualified payment stablecoin issuers with an outstanding issuance of more than $10 billion subject to supervision and regulation by the OCC. “Covered assets” mean payment stablecoin reserves, payment stablecoins used as collateral, and private keys used to issue payment stablecoins, as well as cash and other property received in the course of the provision of custodial or safekeeping services for such assets.⁹⁰

A. National trust banks as custodians

A “federal qualified payment stablecoin issuer” includes an uninsured national trust bank,⁹¹ which in addition to being a covered custodian may also be approved to be a PPSI.

In addition to the Proposed Rule, the OCC also recently issued a separate final rule (Trust Bank Charter Rule)⁹² setting forth the OCC’s interpretation of its trust bank chartering authority under the National Bank Act.⁹³ With respect to the OCC’s trust bank chartering authority, the National Bank Act provides that a nationally chartered firm “is not illegally constituted solely because its operations are or have been required by the Comptroller of the Currency to be limited to those of a trust company and activities related thereto.”⁹⁴ According to the OCC, the purpose of the Trust Bank Charter Rule “is merely to align the OCC’s regulations with the statutory authorization in section 27(a) to avoid any implication that national trust banks may not conduct any activities within the business of banking. These activities may be part of trust company operations, such as custody, or activities related thereto.”⁹⁵ The OCC in the release adopting the Trust Bank Charter Rule noted that it had chartered national trust banks to engage in non-fiduciary activities, including custody and safekeeping activities.⁹⁶ With the Trust Bank Charter Rule, the OCC affirmed its authority to charter national trust banks, including those that provide stablecoin custody services, to provide non-fiduciary services.

B. Custodial property requirements

The GENIUS Act establishes broad parameters and prohibitions for how covered custodians may deal with and handle the property of their customers. The OCC’s Proposed Rule requires that a covered custodian (i) separately account for the covered assets of each of the covered custodian’s customers (covered customers) and (ii) treat and deal with those covered assets as belonging to such covered customer and not as the property of the covered custodian.⁹⁷ A covered custodian also would be required to take appropriate steps to protect the covered assets of covered customers from the claims of creditors of the covered custodian and any sub-custodian, as applicable, including through adopting, implementing, and maintaining written policies, procedures, and internal controls that are adequate to comply with applicable law and that are commensurate with the covered custodian’s size, complexity, and risk profile and with the nature of the applicable covered assets for which it provides custodial or safekeeping services.⁹⁸

The Proposed Rule requires that a covered custodian maintain possession or control of covered assets of a covered customer that are held directly, including in a digital wallet for which the covered custodian controls the associated private keys.⁹⁹ With respect to any payment stablecoin or stablecoin reserve in the form of a tokenized asset held in safekeeping, a covered custodian, or sub-custodian, as applicable, maintains control for purposes of the Proposed Rule if it can reasonably demonstrate, consistent with the standard of care established by applicable law, that no other party, including the covered customer, can transfer the payment stablecoin or tokenized asset using a distributed ledger without the consent of the custodian or sub-custodian, as applicable.¹⁰⁰ The OCC believes that this standard is consistent with the OCC’s past guidance related to control of other crypto-assets for purposes of safekeeping.

C. Statutory exclusions and obligations

The Proposed Rule would codify an exception to the customer property requirement included in the GENIUS Act for custodial withdrawals. The Proposed Rule allows for covered custodians “to withdraw and apply such share of the covered assets of a covered customer necessary to transfer, adjust or settle a transaction or transfer of assets applicable to that covered customer, including the payment of commissions, taxes, storage, and other charges lawfully accruing in connection with the provision of services to that covered customer by the covered custodian.”¹⁰¹

The OCC’s Proposed Rule permits commingling of covered assets of multiple covered customers by a covered custodian in one or more omnibus accounts, to the extent that the steps it has taken pursuant to proposed Section 15.21(b) are adequate to maintain safe and sound practices for the use of omnibus accounts, and to the extent that the use of omnibus accounts is consistent with applicable law.¹⁰²

The OCC indicated that it would seek to rely on Call Report Schedule RC-T that national banks, federal savings associations and federal branches use for their reporting of their custodial businesses.¹⁰³ For covered custodians that are non-bank federal qualified payment stablecoin issuers and state qualified payment stablecoin issuers with an outstanding issuance value of more than $10 billion, the OCC proposes to rely on such entities’ reporting pursuant to section 6(a)(2) of the GENIUS Act’s reporting requirements as part of the payment stablecoin issuers’ quarterly report on financial condition.¹⁰⁴

In addition, the OCC is considering requiring covered custodians to report on a separate form maintained by the OCC the following information: (1) total covered assets under custody, and (2) total payment stablecoin reserves under custody. For payment stablecoin reserves under custody, the OCC is further considering requiring covered custodians to report the following: (a) total payment stablecoin reserves under custody for (i) an affiliate and (ii) third parties; (b) total payment stablecoin reserves held in a deposit account at (i) the covered custodian and (ii) a third-party depository institution; (c) total payment stablecoin reserves held in a deposit account that are not covered by FDIC insurance at (i) the covered custodian and (ii) a third party depository institution; and (d) total payment stablecoin reserves held in each of the categories listed in section 4(a)(1)(A)(i)-(viii) of the GENIUS Act.¹⁰⁵

Consistent with the GENIUS Act, the Proposed Rule clarifies that the Proposed Rule’s custody requirements do not apply to any national bank, Federal savings association, Federal branch, or PPSI solely on the basis that such entity engages in the business of providing hardware or software to facilitate a person’s or entity’s self-custody of their payment stablecoins or private keys.¹⁰⁶ However, the requirements “could apply if, for example, an entity controls or holds itself out as controlling such payment stablecoins or private keys, or provides, or holds itself out as providing safekeeping or custodial services, including services that are ancillary or incidental to its custodial powers, for such payment stablecoins or private keys.”¹⁰⁷

D. Questions regarding the proposed custody requirements

The questions raised by the OCC with respect to its custody requirements focus on several themes including: (1) whether the principles-based approach the OCC has taken is sufficient or whether more granular regulation is necessary, including further details about what constitutes industry standard practices;¹⁰⁸ (2) interpretive questions about assets held by covered entities and the standards for maintaining control of covered assets;¹⁰⁹ and (3) whether sufficient protections are afforded covered customers, including from the use of omnibus accounts by covered custodians and the priority regime for customer claims against a covered custodian.¹¹⁰

V. Capital and operational backstop

The capital requirements under the Proposed Rule apply to subsidiaries of insured national banks, subsidiaries of federal savings associations, uninsured national banks, federal branches or subsidiaries thereof, nonbank entities that are not state qualified payment stablecoin issuers, and state qualified payment stablecoin issuers for whom the OCC has regulatory authority.¹¹¹

Consistent with the capital elements for national banks and federal savings associations under 12 CFR part 3, the proposed capital requirements for PPSIs consist of two capital elements: common equity tier 1 capital and additional tier 1 capital, subject to a few differences of what may or may not comprise each element compared with a bank regulatory capital context.¹¹²

The GENIUS Act requires that capital requirements must be tailored to the business model and risk profile of permitted payment stablecoin issuers and must not exceed requirements sufficient to ensure the ongoing operations of permitted payment stablecoin issuers.¹¹³

The overall approach in the Proposed Rule “would provide for an individualized evaluation of each prospective permitted payment stablecoin issuer, consistent with the process the OCC applies when determining minimum capital the requirements for chartering national trust banks.”¹¹⁴ During a “de novo period,” generally the three-year period following chartering or licensing by the OCC of the PPSI to issue stablecoins, the OCC would evaluate and set a minimum capital requirement on a basis consistent with that process. “For example, the OCC would consider the proposed [PPSI]’s risk profile, business strategy, future growth prospects, and cushions for unexpected losses. At chartering or licensing and during the de novo period, the OCC would consider factors including: the composition, stability, and direction of revenue; the level and composition of expenses; the level of retained earnings; the quantity and direction of strategic risk; the quality of management processes, including the adequacy of internal and external audit, internal controls, and compliance management; the quantity of transaction risk from delivery and administration of asset management products and services; and the impact of external factors, including economic conditions and evolving technology.”¹¹⁵ The OCC proposes a floor of $5 million on the minimum capital requirement during the de novo period. A portion of the de novo capital requirement generally must be maintained in certain liquid assets.

The Proposed Rule also includes an ongoing capital requirement, which would require PPSIs (i) to maintain capital commensurate with the level and nature of all risks to which the PPSI is exposed, including risks for off-balance sheet activities and (ii) to have a process for assessing its overall capital adequacy in relation to its business model and risk profile and a comprehensive strategy for sustaining an appropriate level of capital to maintain ongoing operations.¹¹⁶ The amount of capital necessary to meet this ongoing capital requirement would be based on estimates submitted during the de novo chartering phase, and after approval, this amount would incorporate the operating history of the PPSI and loss experienced from all sources, including operational risk.¹¹⁷

The Proposed Rule also would require that PPSIs hold, independent of the de novo and ongoing capital requirements (and any assets held as reserve assets), a liquid pool of identifiable assets designated to help a PPSI “meet short term liquidity needs, stabilize . . . after [a] disruption, and continue or resume normal operations.”¹¹⁸ This proposed operational backstop would be based on “the actual total expenses of the [PPSI] over the [preceding] 12 months[,]” and calculated and adjusted each quarter.¹¹⁹ The OCC would also seek to modify 12 CFR part 3 to specify that any PPSI owned by an insured national bank or federal savings association must be deconsolidated for regulatory capital purposes, and that any interest in retained earnings of the PPSI must be deducted from the common equity tier 1 capital of the national bank or savings association.¹²⁰ The deduction is meant to ensure that the same amount would not count as capital at both PPSI and its parent insured national bank or Federal savings association.

The Proposed Rule contemplates that the OCC may require an additional capital or backstop requirement for an individual permitted payment stablecoin issuer in view of its circumstances.¹²¹

The OCC invites discussion on alternative approaches to calculating the ongoing capital requirements of PPSIs, including variable capital components based on a percentage of outstanding issuance volume, or calculations tied more directly to the price, interest rate risk, credit risk or operational risk, or, for PPSIs that also provide custody services, a variable capital component based on the “fair value of assets held in custody."¹²²

VI. Application Procedures

Under section 3 of the GENIUS Act, subject to certain limited exceptions, only a permitted payment stablecoin issuer may issue a payment stablecoin in the United States.¹²³ The GENIUS Act defines a permitted payment stablecoin issuer as a person formed in the US that is a subsidiary of an insured depository institution approved by its primary federal payment stablecoin regulator, a federal qualified payment stablecoin issuer, or a state qualified payment stablecoin issuer.¹²⁴ The Proposed Rule would establish a licensing process for

• insured national banks, federal savings associations, or federal branches that seek to issue payment stablecoins through a subsidiary,
• nonbank entities that seek to be federal qualified payment stablecoin issuers and
• uninsured national banks, and uninsured federal branches that seek to be federal qualified payment stablecoin issuers.

Section 18(a) of the GENIUS Act provides an exception from the prohibition in section 3 of the GENIUS Act for FPSIs registered with the OCC and sets forth the registration regime and other requirements for FPSIs. The Proposed Rule would also implement a registration process for FPSIs, which is discussed in Part VI.D. below.

A. Contents of license application to the OCC

Covered US entities seeking to issue payment stablecoins must file an application and obtain OCC approval prior to issuance.¹²⁵

The application must be submitted in the form prescribed by the OCC and filed with the appropriate OCC licensing office.¹²⁶

Each director, executive officer and principal shareholder must submit the information prescribed in the Interagency Biographical and Financial Report.¹²⁷

The OCC may examine or investigate facts relating to the application and may collect fingerprints for submission to the Federal Bureau of Investigation for a national criminal history background check.¹²⁸

B. Timeline for decision; appeal; deemed approval

The OCC must notify the applicant within 30 days whether the application is substantially complete.¹²⁹

The OCC must approve or deny a substantially complete application within 120 days.¹³⁰

If the OCC fails to render a decision within that 120-day period, the application is deemed approved by operation of law.¹³¹

The OCC may deny an application only if the activities would be unsafe or unsound based on the statutory factors in Section 5(c) of the GENIUS Act.¹³²

An applicant whose application has been denied may request a written or oral hearing within 30 days of receipt of the denial.¹³³

C. Evaluation criteria

The GENIUS Act¹³⁴ requires that the OCC consider the following factors in its evaluation of a license application:

1. the ability of the applicant (or subsidiary in the case of an insured depository institution), based on financial condition and resources, to meet the requirements of Section 4 of the GENIUS Act;
2. whether any of the applicant’s officers or directors have been convicted of a felony offense involving certain financial crimes;
3. the competence, experience, and integrity of the officers, directors, and principal shareholders of the applicant, its subsidiaries, and parent company;
4. whether the applicant’s redemption policy meets the standards under the GENIUS Act; and
5. any other factors established by the primary Federal payment stablecoin regulator that are necessary to ensure the safety and soundness of the PPSI.¹³⁵ The Proposed Rule would contain the first four factors above and seeks comment on whether to include additional factors necessary to ensure the safety and soundness of the PPSI.¹³⁶

D. Foreign payment stablecoin issuer

The Proposed Rule would implement Section 18 of the GENIUS Act by establishing a framework under which FPSIs may operate in the United States on a registered basis, subject to OCC oversight and specified conditions.

1. Exemption and baseline requirements

The Proposed Rule¹³⁷ would implement the exemption for qualifying FPSIs set out in the GENIUS Act.¹³⁸ In particular, an FPSI would be exempt from the prohibitions of Section 3 of the GENIUS Act if the FPSI:

• is subject to regulation and supervision by a foreign payment stablecoin regulator that has a regulatory and supervisory regime comparable to the GENIUS Act with respect to payment stablecoins, as determined by the Secretary of the Treasury pursuant to the GENIUS Act;
• is registered with the OCC pursuant to section 15.32 of the Proposed Rule;
• holds reserves in United States financial institutions sufficient to meet demands of United States customers, unless otherwise permitted under a reciprocal arrangement created and implemented by the Secretary of the Treasury under the GENIUS Act; and
• is not domiciled in a country subject to comprehensive economic sanctions by the United States or in a jurisdiction that the Secretary of the Treasury has determined to be a jurisdiction of primary money laundering concern.

2. Ongoing OCC supervision and compliance

Registered FPSIs would be required by the Proposed Rule¹³⁹ to fully accede to any request by the OCC regarding reporting, supervision, or examination. FPSIs would be required to produce the reports required of a PPSI as well as any other reports the OCC may require, subject to any exemption granted by the OCC.¹⁴⁰

The OCC will conduct a full-scope examinations of a registered FPSI at the same frequency as the OCC would examine a PPSI unless the OCC determines, in its sole discretion, to examine at a different frequency.¹⁴¹

The GENIUS Act¹⁴² prohibits FPSIs from paying the holder of a payment stablecoin any form of interest or yield (whether in cash, tokens, or other consideration) solely in connection with the holding, use, or retention of the payment stablecoin. The Proposed Rule¹⁴³ would implement the prohibition in accordance with the prohibition applicable to PPSIs.

3. Registration process¹⁴⁴

Foreign issuers seeking to operate in the United States must submit an application to the OCC that includes:

• required application form information;
• evidence that the Secretary of the Treasury has determined that the applicant is subject to a regulatory and supervisory regime comparable to the GENIUS Act with respect to payment stablecoins, under section 18 of the GENIUS Act;
• certifications regarding information sharing, compliance, and accuracy; and
• consent to US jurisdiction.

Applications are deemed approved within 30 days unless rejected by the OCC.

4. Evaluation criteria and conditions

In evaluating applications under the Proposed Rule, the OCC would consider the following factors:

• the Secretary of the Treasury’s determination that the foreign payment stablecoin issuer is subject to a regulatory and supervisory regime comparable to the GENIUS Act with respect to payment stablecoins under section 18 of the GENIUS Act;
• the financial and managerial resources supporting US operations;
• the issuer’s ability to provide sufficient information for supervision;
• risks to US financial stability (including timely redemption risks); and illicit finance risks.¹⁴⁵

Approved FPSIs would be subject to additional conditions,¹⁴⁶ including:

providing the OCC access to personnel, books, and records (in English and accessible in the United States);

maintaining and evidencing sufficient US-based reserves;

submitting monthly reports on US stablecoin holdings and reserve composition;

promptly notifying and curing any reserve deficiencies; and

complying with all understandings, commitments, or conditions contained in any determination by the Secretary of the Treasury or any arrangements entered into by the United States and the foreign jurisdiction under section 18 of the GENIUS Act.

The FPSI must also consent to the jurisdiction of US courts and regulators for enforcement purposes.

5. Denial and appeal

The OCC may reject an application based on the factors for evaluating applications on the inability to meet the required conditions of approval.¹⁴⁷

Applicants may appeal a refection of the application within 30 days through a written or oral hearing process, with a final OCC determination issued following de novo review.