US Regulators Allow Crypto Exchanges To Offer Stablecoin Rewards Despite Banks’ Concerns

US banking regulators have allowed cryptocurrency firms to continue providing interest-like rewards on stablecoin holdings even after concerns from traditional banks that these products could draw deposits away from the banking system.

As reported by the Associated Press (AP), the decision is part of the implementation of the GENIUS Act, a US law signed in 2025 to create a regulatory framework for stablecoins. The rules were issued by the Office of the Comptroller of the Currency (OCC), the federal agency that supervises national banks.

What The OCC Rules Mean For Stablecoin Rewards?

Stablecoins are cryptocurrencies designed to maintain a relatively stable value, usually around USD 1 per coin. They are backed by assets such as bank deposits and US Treasury securities, which earn interest.

Under the new rules, stablecoin issuers such as Circle remain prohibited from paying interest directly to people holding their coins. However, exchanges that trade and hold stablecoins, including Coinbase and Robinhood, can pass on earnings to customers through interest-like rewards on a case-by-case basis.

Crypto companies want to offer these rewards by converting the interest earned on assets backing stablecoins into returns for customers. The OCC’s decision means this practice has not been prohibited, despite calls from banking groups for tighter restrictions.

The difference in returns is one reason the issue has drawn attention. Coinbase offers yields of up to 3.5 per cent on USDC balances, compared with an average yield of 0.38 per cent on traditional savings accounts, according to Federal Deposit Insurance Corp. figures cited by AP.

Why Banks Are Concerned About Stablecoin Rewards?

Banking groups fear customers could shift savings from traditional accounts to crypto platforms that offer higher returns. This movement of deposits from banks to cryptocurrency platforms is known as deposit flight.

Banks argue that large-scale deposit outflows could reduce their capacity to lend. The banking industry has also warned that, in a worst-case scenario, the pressure could cause some banks to close or fail. The potential effect of stablecoins on traditional lending was a point of debate during the drafting of the CLARITY Act.

The American Bankers Association (ABA), a banking industry lobby group, said the OCC’s decision could threaten funds banks use to provide loans that support the US economy. The association also argued that the rules preserve the position of crypto platforms despite Congress’s intention to protect local lending.

Consumer advocacy groups have raised concerns about customers confusing stablecoin rewards with interest on bank deposits. Unlike eligible bank deposits, stablecoin holdings do not have equivalent protection through Federal Deposit Insurance Corp. deposit insurance.