So, OCC has just released a regulatory proposal for stablecoins based on the GENIUS Act, and there's a particularly controversial section that many people are discussing right now.

At first glance, this 376-page proposal looks pretty standard—talking about custodian controls, capital requirements, and other usual regulatory technicalities. But there's one part that has caused a stir, especially within the crypto industry. That section discusses whether stablecoin issuers and their partners are allowed or not allowed to provide yields to users.

According to the legal language in the proposal, stablecoin issuers basically cannot pay interest or yields in any form—cash, tokens, or other—simply because users are holding their stablecoins. But what’s interesting (and somewhat ambiguous) is the part where OCC states they understand that issuers might try to work around this through third parties.

This is where the issue gets complicated. The proposal states that OCC will consider such payments as yields if there is a clear contract stating so, and that a third party is defined as an entity that pays yields as a service. However, there’s ambiguity in the definition of “affiliate,” which confuses some people. If an issuer owns 25% or more of a third party, they cannot offer yields. This opens up opportunities for third parties without ownership stake issues.

Large companies like Coinbase and Circle will need to adjust their relationships to stay compliant. The same goes for PayPal and Paxos with their PYUSD. Matthew Sigal from VanEck even suggests they might need to rebrand their yield programs as loyalty programs to make them look different.

But there’s another twist—yield-bearing stablecoins are also one of the issues delaying the market structure bill that the industry has been waiting for. There’s speculation that this OCC proposal might mean Congress doesn’t need to address yields in that bill, but others say Congress will definitely still discuss this part.

If the market structure bill actually becomes law before OCC finishes their regulation, regulators will have to issue an interim proposal to stay compliant. This could lead to a lengthy and complex regulatory process.

Meanwhile, some latest draft language circulating among legislators has not yet reached consensus between the banking industry and crypto. This is definitely a situation to watch—regulatory decisions here could significantly reshape how stablecoins operate in the US.