Can You Still Earn Stablecoin Rewards? What the Fed’s New GENIUS Act Rules Mean After CLARITY’s Collapse

Key takeaways

• The CLARITY Act failed a 49–50 procedural vote in the U.S. Senate on September 15, 2026, and its compromise on stablecoin rewards failed with it.
• The GENIUS Act, signed in July 2025, is now the main federal law deciding whether crypto platforms can pay rewards on stablecoin balances.
• On September 24, the Federal Reserve became the last of the three federal banking regulators to propose GENIUS Act rules, and it matched the OCC’s presumption against yield paid through third parties.
• The proposals appear to leave only a narrow opening for rewards that work like card or loyalty perks rather than interest on idle balances.
• Regulators missed their July 2026 deadline for final rules, but the law takes effect on January 18, 2027 either way.

For most of 2026, the fight over stablecoin rewards played out in Congress. Banks wanted crypto platforms barred from paying anything that resembles interest on dollar-pegged tokens. Coinbase and its allies wanted room to keep paying users. That fight has now left Capitol Hill. With the CLARITY Act stalled in the Senate, the rules that will decide whether USDC balances keep earning are being written by bank regulators, and they have until January to finish.

The latest move came on September 24, when the Federal Reserve requested public comment on two proposals for the stablecoin issuers it supervises. One of them contains the rewards provision the industry had been waiting for, and it offers little comfort to anyone hoping that CLARITY’s collapse would leave yield programs untouched.

How the CLARITY Act fell apart

The Digital Asset Market Clarity Act was designed to set rules for the wider crypto market, including which agency oversees which tokens. On September 15, a Senate motion to begin debate on the bill drew 49 votes in favor and 50 against, far short of the 60 needed to advance. According to FinTech Weekly’s account of the vote, the core of the bill, which split crypto oversight between the SEC and the CFTC, was not the problem. The sticking point was ethics language on officials’ crypto holdings, which Democrats said did not cover the president and his family.

Stablecoin rewards were not the deciding issue on the day, but they had been one of the bill’s longest-running disputes. In May, Senators Thom Tillis and Angela Alsobrooks floated compromise language that would have barred rewards on stablecoin balances that are “economically or functionally equivalent” to interest on a bank deposit, while still allowing rewards tied to transactions and other account activity. Coinbase backed the deal. The banks did not, and as recently as mid-September eight U.S. banking groups were urging the Senate to tighten the restrictions further.

When the bill stalled, the compromise stalled with it. As a result, the GENIUS Act is now the primary law governing stablecoin rewards in the United States.

What the GENIUS Act actually bans

The GENIUS Act, signed on July 18, 2025, created the first federal licensing regime for payment stablecoins. It requires full reserve backing and assigns oversight of issuers to the OCC, the FDIC or the Fed, depending on their charter. On yield, the statute is narrower than many people assume: it prohibits stablecoin issuers from paying interest or yield to holders in connection with holding, using or retaining the token.

The word “issuers” matters. Coinbase does not issue USDC; Circle does. Circle earns interest on the Treasury bills and repurchase agreements that back the token, shares part of that income with Coinbase under their distribution agreement, and Coinbase passes a portion on to users as rewards. The sums are large. In the second quarter of 2026, Circle reported $668 million in reserve income on average USDC circulation of $76.5 billion, while Coinbase earned $292 million from stablecoins, roughly a quarter of its revenue. The same report notes that the Fed raised its policy rate to an upper bound of 4.00% on September 16, which lifts the income available to fund those rewards.

Whether this pass-through model survives depends on how regulators read the ban. That is exactly what the three proposals address.

Three regulators, one presumption

The OCC moved first. Its proposal, published under OCC Bulletin 2026-3 and in the Federal Register on March 2, 2026, restated the ban and then went further. It said issuers could try to route prohibited yield through arrangements with third parties, and that it would presume a violation where a contract exists and the third party pays yield as a service. Companies could rebut that presumption with evidence. CoinDesk reported at the time that people tracking the rulemaking found the section ambiguous, and that VanEck’s head of digital assets research expected deals like Coinbase’s to be reshaped to look more like loyalty programs than interest payments.

The FDIC, which opened its GENIUS Act rulemaking in December 2025, published a broader proposal in April that it deliberately aligned with the OCC’s approach wherever relevant.

The Fed’s package completes the set. The first proposal would require Fed-supervised issuers to back their tokens fully with permissible reserve assets such as short-term Treasury bills, set standardized capital requirements, add rules for firms that safekeep reserves, and clarify which stablecoin activities Fed-supervised banks may carry out. It also contains the rewards provision. The Fed said it would treat certain third-party arrangements as presumptively banned yield payments, and described that approach as consistent with the OCC’s. The second proposal sets out how Fed-supervised banks can apply to issue stablecoins through a subsidiary, including a business plan, financial information and a process for appeals and hearings.

Fed Governor Michael Barr, the central bank’s former vice chair for supervision, used his statement on the proposals to stress redemption. Stablecoins, he said, are only stable if they can be “reliably and promptly redeemed at par,” including during market stress. Both proposals are open for comment for 60 days after their September 29 publication in the Federal Register, which puts the deadline in late November.

Where the rules stand

So are stablecoin rewards banned?

Not outright, and not yet. Three things are true at the same time.

First, nothing is final. All three agencies missed the GENIUS Act’s July 18, 2026 deadline for implementing rules, and proposed rules usually change after public comment. Second, the direction is consistent. Each regulator has adopted the same presumption against issuers funding yield through partners, and that presumption targets the pass-through model Circle and Coinbase rely on. Third, a gap remains. In CoinDesk’s reading of the Fed proposal, the agencies appear to leave a thin opening for platform rewards that work more like credit-card incentives.

In practice, that points to a shift away from paying people simply for holding stablecoins and toward paying them for doing something: spending, trading or joining a membership program. The line resembles the one the CLARITY compromise tried to draw, except that regulators will now draw it instead of Congress, and banks have made clear they will keep pushing to narrow it.

Why January 18, 2027 is the date that matters

Under the GENIUS Act rulemaking timeline, the law takes effect on the earlier of two dates: January 18, 2027, or 120 days after regulators issue final rules. Because none of the rules is final, and any rule finalized from today onward would start a 120-day clock that ends after mid-January, January 18 is effectively the operative date.

That leaves regulators little room. Comments on the Fed’s package close in late November, and the agencies then need to review them and publish final versions. If they do not finish in time, the law’s core prohibitions, including the ban on issuer-paid yield, will still apply in January, leaving platforms to interpret them without final guidance.

What stablecoin holders should watch

• Rewards on USDC and other stablecoins continue for now, because none of the proposals has taken effect.
• Program terms are likely to change around January 18, 2027, as platforms restructure rewards to tie them to activity rather than idle balances.
• The late-November comment deadline and any final OCC rule are the next milestones, since the other agencies have aligned with the OCC’s approach.
• Congress could return to market structure legislation, but with the midterm elections only weeks away, any progress this year is more likely to come from the agencies than from lawmakers.

How the U.S. approach compares with Europe

For readers in the EU, the U.S. debate may look familiar. The EU’s Markets in Crypto-Assets Regulation already bars both issuers of e-money tokens, the EU category that covers fiat-backed stablecoins such as USDC and EURC, and crypto-asset service providers from granting interest on those tokens. MiCA also defines interest broadly, to include any benefit tied to how long a holder keeps the tokens. The United States is heading toward a similar result by a different route, with the fight centered on whether a platform’s rewards are really interest under another name.

Europe is revisiting its own rules as well. In their response to the European Commission’s MiCA review, the ECB and the EU’s national central banks have asked Brussels to drop the requirement that large stablecoins hold 60% of their reserves as bank deposits.