The GENIUS Act, signed into federal law on July 18, 2025, prohibits permitted stablecoin issuers from paying any form of interest or yield to holders under Section 4(a)(11). The ban applies to cash payments, token distributions, and similar benefits tied to holding a stablecoin. The prohibition does not bind every issuer equally: Tether's global USDT sits outside the US framework entirely, while Circle's US-regulated USDC falls under the federal yield ban, creating a competitive asymmetry in the stablecoin market where offshore issuers retain yield advantages unavailable to US-regulated entities.
Section 4(a)(11) Bars Yield Payments by Permitted Issuers
Section 4(a)(11) of the GENIUS Act contains the operative language barring permitted payment stablecoin issuers from paying yield or interest to holders in any form, according to a Spark research breakdown of the statute's reserve and yield provisions. The prohibition covers direct distributions as well as rebate-style and points-based workarounds tied to a user's balance, State Street Global Advisors noted in a separate explainer. Issuers must hold 1:1 reserves in high-quality liquid assets, principally cash and short-term US Treasuries. They earn yield on those reserves, and holders see none of it.
The Office of the Comptroller of the Currency extended the prohibition further. On February 25, 2026, the OCC issued a 376-page proposed rulemaking that introduced a rebuttable presumption covering affiliate and third-party yield arrangements, Perkins Coie noted. Under the proposed rule, any coordinated arrangement between an issuer and a related third party to pay holders' yield is presumed to violate the statute. The comment period closed on May 1, 2026.
Tether, Circle, and Offshore Entities Face Different Yield Rules
The yield ban binds issuers operating under the US federal stablecoin framework. Tether's flagship USDT is issued offshore and is not currently subject to the GENIUS Act's reserve and yield provisions. Stablecoins issued from the UAE, Singapore, or Hong Kong face no such ban. Circle can offer yield on stablecoins issued through its overseas-regulated entities—only Circle's US-regulated USDC is locked out.
Circle retains the option to structure yield-bearing tokenized products through non-US entities, as it does with USYC, a yield-bearing tokenized money market fund issued under a Bermuda DABA license.
Tether Launched USA₮ Through Anchorage Digital on January 27, 2026
Tether moved to cover the US flank separately. On January 27, 2026, Tether launched USA₮, a separate dollar-backed token issued by Anchorage Digital Bank, which has held a national trust charter from the OCC since January 2021. Cantor Fitzgerald serves as the reserve custodian, and Bo Hines, former Executive Director of the White House Crypto Council, was named CEO of the Tether USA₮ entity. The structure places the compliant US product inside a nationally chartered bank while leaving global USDT outside the statute's reach.
Nathan McCauley, CEO and Co-Founder of Anchorage Digital, said in the launch announcement that USA₮ "reflects what's possible when stablecoin issuance is done inside the U.S. banking system, under real supervision, with real accountability, at real scale."
Circle Received OCC Charter Approval on July 10, 2026
Circle received final OCC approval on July 10, 2026, to establish First National Digital Currency Bank, operating under the name Circle National Trust. The company filed its application on June 30, 2025, and received conditional approval in December 2025. The charter places Circle under direct federal oversight by the OCC for the first time.
USDC had roughly $73.2 billion in circulation at the time of approval, making it the world's largest regulated stablecoin. Jeremy Allaire, Circle's Co-Founder and CEO, wrote in a press statement that federal supervision gives financial institutions "clarity and confidence" to build on public blockchains. Jasper Sneff-Nanni, managing principal at fintech consulting firm FS Vector, told American Banker that opening the trust bank is "a tremendous accomplishment for Circle and, for stablecoins, a step into the world of the GENIUS Act."
Yield Ban Creates Compliance Penalty for US-Regulated Issuers
The competitive distortion runs in one direction. Circle's S-1 filing revealed that interest earned on USDC reserve assets accounted for 95% to 99% of the company's total revenue from 2022 to 2024, Spark research noted. Standard USDC holders receive none of that yield. It flows entirely to the issuer.
Tether earned over $10 billion in net profit during 2025 on roughly $193 billion in reserve assets backing about $186 billion in USDT in circulation, largely from Treasury yields. Tether keeps its global yield advantage while competing for US market share through the separately structured USA₮. The result is a compliance penalty that falls hardest on the issuer that sought US regulation earliest. Circle built USDC as a fully regulated, fully attested product.
Under the GENIUS Act framework, compliance costs the ability to compete on yield with offshore stablecoins and with DeFi lending protocols, where USDC supply rates on Aave and Compound have oscillated in the mid-single digits through 2026, according to DeFiLlama data.
A Congressional Research Service report published in March 2026 framed the debate in plain terms: banks favor the strict prohibition on paying interest on stablecoins and have argued to close any remaining loopholes. Crypto industry participants view bank opposition as anticompetitive behavior by incumbents protecting the $6.6 trillion US transactional deposit market. The GENIUS Act takes effect on January 18, 2027, or 120 days after regulators issue final implementing rules, whichever comes first.
FAQ
What does the GENIUS Act prohibit for stablecoin issuers?
The GENIUS Act, signed into federal law on July 18, 2025, prohibits permitted stablecoin issuers from paying any form of interest or yield to holders under Section 4(a)(11). The ban applies to cash payments, token distributions, rebate-style arrangements, and points-based workarounds tied to a user's balance. Issuers must hold 1:1 reserves in high-quality liquid assets and earn yield on those reserves, but holders receive none of it.
Why does Tether's USDT avoid the yield ban while Circle's USDC does not?
Tether's flagship USDT is issued offshore and is not currently subject to the GENIUS Act's reserve and yield provisions. The yield ban binds only issuers operating under the US federal stablecoin framework. Circle's US-regulated USDC falls under the federal prohibition, while Tether launched a separate compliant product, USA₮, through Anchorage Digital Bank on January 27, 2026, to serve the US market without affecting global USDT.
When did Circle receive OCC approval for its national trust charter?
Circle received final OCC approval on July 10, 2026, to establish First National Digital Currency Bank, operating under the name Circle National Trust. The company filed its application on June 30, 2025, and received conditional approval in December 2025. USDC had roughly $73.2 billion in circulation at the time of approval.
