Cryptocurrency companies can keep paying interest-like rewards, say federal bank regulators

NEW YORK (AP) – Cryptocurrency firms can continue to pay interest-like rewards to customers, federal regulators stated Wednesday, despite warnings from banks that such programs could drain trillions of dollars in deposits from the banking system.

Key points

• But the exchanges that trade and hold those stablecoins, like Coinbase, Robinhood and others, can pass along any earnings from those coins to customers in interest-like rewards.
• Stablecoins are a type of cryptocurrency designed to maintain a steady value, typically $1 per coin.
• The new rules are part of the implementation of the GENIUS Act.

What happened

In practice, the new rules are part of the implementation of the GENIUS Act. It was signed into law last year and was meant to codify the rules and regulations around issuers of stablecoins.

Under the rules published by the Office of the Comptroller of the Currency, stablecoin issuers like Circle will continue to be prohibited from paying interest to individuals holding their coins. But the exchanges that trade and hold those stablecoins, like Coinbase, Robinhood and others, can pass along any earnings from those coins to customers in interest-like rewards.

Stablecoins are a type of cryptocurrency designed to maintain a steady value, typically $1 per coin. Stablecoins are backed by bank deposits and U.S. Treasuries, which earn interest.

The bottom line

Taken together, the developments around cryptocurrency companies can keep paying interest-like rewards, say federal bank regulators point to a situation that is still moving, and the coming days should bring more clarity.