The OCC’s Stablecoin Rule Is Final. Wisconsin Has a 2028 Decision to Make.

On October 15, TruStage Digital Assets walked our Legislature’s Study Committee on Cryptocurrency through a stablecoin it designed for credit unions and community banks. TruStage is a Madison company founded in 1935, and it describes itself as the leading provider of insurance and financial services to credit unions. The presentation didn’t say which regulatory route the coin would take.⁷

If you haven’t run into one yet, a payment stablecoin is a digital token meant to be worth exactly one dollar, backed by a promise that you can trade it back for that dollar whenever you like. Two you may recognize are Circle’s USDC and PayPal USD, which a company called Paxos issues for PayPal.¹⁵¹⁶

Eight days after TruStage’s presentation, the federal government published the rules a coin like that would follow if its issuer went through Washington. The Office of the Comptroller of the Currency, the agency that supervises national banks, put its final rule implementing the GENIUS Act into the Federal Register on October 23.¹ The rule takes effect January 18, 2027, and so does the GENIUS Act itself. Congress wrote the law to switch on 18 months after it was signed or 120 days after regulators finalized rules, whichever came first, and the OCC confirms that the 18-month mark came first.²

When I wrote about the GENIUS Act’s first year, I described it as binding law with a half-written instruction manual, and the best I could say about timing was “around January 2027.” The OCC has now written its chapter of that manual, and the date is settled. And because Treasury may measure state regimes against it, the chapter also bears on a decision Wisconsin hasn’t made yet.

Reserves must cover every coin, and redemption has a two-day limit

Before getting to what the rule requires, it’s helpful to know whom it applies to. Under the GENIUS Act, a payment stablecoin can come from one of three places: an insured bank or credit union, through a subsidiary; a nonbank company the Comptroller approves; or a company approved by a state regulator whose rules count as “substantially similar” to the federal ones.³ The OCC’s rule covers the issuers it supervises: the nonbanks it approves, national banks and federal savings associations and their subsidiaries, foreign issuers, and certain state-approved issuers, such as those that grow past $10 billion. Everyone else answers to their own regulators. Still, it is the first final rule from any federal stablecoin regulator, and the OCC worked through about 328 comments before issuing it.¹

Most of the rule’s length goes to a simple question: when you hand an issuer a dollar for a coin, what happens to that dollar? It has to sit in reserve, and the reserve has to cover every coin outstanding “at all times.”⁴ Circle, for example, says most of the reserve behind USDC is held in a government money market fund managed by BlackRock, with the rest in cash, mostly at a handful of very large banks.¹⁵

The next question is what happens if a lot of people want their dollars back at once. For that, an issuer needs money it can reach right away, so the final rule requires at least 5 percent of reserves in deposits payable on demand or in an account at a Federal Reserve Bank. One version of the OCC’s proposal had asked for 10 percent. The OCC also dropped a plan to make the largest issuers keep part of their reserves in insured deposits, agreeing with commenters that it added operational risk without enough benefit.⁴

Then there’s where the reserve sits, and USDC’s own history is the best illustration I know. In March 2023, about $3.3 billion of the roughly $40 billion behind USDC was at Silicon Valley Bank when the bank failed, and the coin briefly slipped below a dollar even though it was fully backed.¹³ I used the same example in Briefing 002 to show that a coin can lose its peg because of where its reserve is held. The final rule generally caps an issuer’s exposure to any single bank or other counterparty at 40 percent of its reserves, with exceptions for things like U.S. government debt and assets held by qualifying custodians.⁴ That cap wouldn’t have prevented what happened to USDC, since 8 percent is well under it, but it does keep an issuer from betting most of its reserve on one institution.

Then there’s getting your dollar back. When you trade a stablecoin in, the issuer’s published policy has to promise that redemption “may not exceed two business days.” The clock starts once the issuer has your request and has finished onboarding you, and redemption counts as done when the issuer has processed it and sent the money on its way, which can be a little before it lands in your bank account.⁵

The bigger change is what happens under stress. Imagine a hypothetical issuer with $1 billion in coins outstanding. A worrying headline about one of its banks breaks one morning, and within 24 hours holders have asked to redeem more than $100 million, over 10 percent of the coins in circulation. The OCC’s proposal would have automatically stretched the redemption deadline to seven calendar days in that situation. Commenters argued that an automatic delay would make things worse: if holders are already nervous about getting their money back, learning it’s now a week away gives everyone else a reason to get in line too. The OCC agreed that the automatic extension “could prove pro-cyclical and trigger or exacerbate runs,” and took it out. Under the final rule, crossing 10 percent means the issuer has to notify the OCC within 24 hours and can ask for more time. Redemptions don’t pause on their own, and the OCC decides whether to grant an extension.⁵

Third-party rewards are now judged case by case

The GENIUS Act bars an issuer from paying you interest or yield “solely in connection with the holding, use, or retention” of its coin.⁶ A payment stablecoin is designed to move money the way cash does, and cash in your wallet doesn’t earn interest. The harder question, one I left open in Briefing 002 while we waited on the regulators, is whether someone else can pay you a “reward” the issuer itself can’t. For the issuers it supervises, the OCC has now given its first answer.

Picture a hypothetical arrangement. A stablecoin issuer pays a cryptocurrency exchange it works with, and the exchange pays its customers a reward for keeping that issuer’s coin in their accounts. The OCC’s proposal would have presumed a setup like that broke the ban whenever an issuer had a deal to pay an affiliate or related third party and that party paid yield to the coin’s holders. The issuer would then have had to prove the payments were for something else.

The final rule drops that presumption. The ban itself hasn’t moved, and the OCC says flatly that an issuer can’t hand money to another company to pay out yield it couldn’t pay directly. What changed is the starting point. The OCC will look at the facts of each arrangement, including whether a payment is really for holding the coin or at least partly for something else, and it kept its power to shut down anything it decides is an evasion. Dropping the presumption isn’t an approval of any particular program, and an arrangement like my hypothetical could still be found to be an evasion once the OCC looks at it. The agency also expects to revise the rule as it gains experience, which suggests the question isn’t settled.⁶

TruStage’s own slides warn that stablecoin efforts by big banks and tech companies “compound the risk of deposit flight” for credit unions and community banks.⁷ A coin that pays you to hold it starts to look a lot like a savings account, and a coin that can’t competes far less directly. How far the ban reaches into affiliates and partners will shape that competition for the community banks and credit unions our state relies on.

A state regime would be measured against federal rules

Everything so far describes issuers the OCC supervises. The GENIUS Act also lets states supervise their own, and that’s where Wisconsin’s decision comes in. An issuer with up to $10 billion in coins outstanding can choose state supervision instead, as long as the state’s regime is “substantially similar” to the federal framework.³ Treasury decides what similar means, and in April it proposed an answer. Its draft defines the federal framework to include the Act and “[a]ny interpretations thereof, or regulations thereunder, issued by the Office of the Comptroller of the Currency and published in the Federal Register.”⁸ If Treasury finalizes that definition, the rule published October 23 becomes part of the measuring stick for any state that wants to supervise its own issuers, ours included.

Treasury’s test is still a proposal, and no final version had been published as of November 3. On paper, it leaves states some room. The draft sorts federal requirements into two piles. A state would have to match some of them in substance. For the rest, it could write its own version, as long as the result is “at least as stringent and protective” as the federal framework. Treasury calls that “wide latitude for States to deviate from certain Federal regulations.” In Briefing 002, I said that how strictly Treasury defined “substantially similar” would decide how much room states have to design their own approach. State bank supervisors read the same draft as giving states “little latitude,” since it could require some rules identical to the OCC’s and treat the OCC’s version of others “as a floor.”¹⁴ The final version will show whose reading holds.

Whichever reading wins, a state that wants its own regime still has to get it in front of federal reviewers, and the GENIUS Act puts a date on that. A state regulator’s initial certification is due “not later than 1 year after the effective date of this Act,”⁹ which lands on Tuesday, January 18, 2028, a good deal more specific than the “roughly January 2028” I could offer in Briefing 002. The deadline turns out to be more forgiving than the statute’s wording suggests. Treasury’s certification procedures, an interim final rule published September 30, say a state meets it by submitting any form of certification by that date, even one that is conditional on legislative or regulatory work still to come. The federal review committee won’t process a conditional filing until the state amends it into a complete one, and Treasury is asking the public whether that approach should stand.¹⁰

What happens to a state that files nothing by January 18, 2028, is still unsettled. The same procedures ask whether later filings should ever be considered and whether states should be able to request an extension. Treasury won’t accept any certifications until a paperwork approval comes through, and comments are open until November 30.¹⁰

The Legislative Council’s memo to the study committee points to frameworks recently enacted in California, Alabama, and Delaware as models for regulating private stablecoin issuers.¹¹ As I noted in Briefing 004, Wisconsin hasn’t enacted one. Building a regime here would mean choosing “a State agency that has primary regulatory and supervisory authority” over stablecoin issuers, most likely our Department of Financial Institutions, and giving it the authority, the rules, and the examiners to do the job. A conditional certification could be filed before all of that is in place, but it wouldn’t be reviewed until the work was done.

In Briefing 002, I argued that if Wisconsin did nothing, homegrown stablecoin issuers would end up going straight to Washington. That still mostly holds. Picture a hypothetical Eau Claire payments startup that wants to issue its own dollar coin. Without a Wisconsin regime, it can apply to the OCC and operate under the rule published October 23. It could also, if it meets another state’s requirements, seek approval from that state’s regulator once that state’s regime has been certified. What’s new is that the federal route now has final rules to plan around. Our insured banks and credit unions have a third route of their own, through a subsidiary.³

The state option is built for smaller issuers. Once a state-approved nonbank issuer passes $10 billion in coins outstanding, it must either move into the federal framework within 360 days, where the OCC supervises it alongside the state, or stop issuing new coins from the day it crosses the line until it drops back under. Federal regulators can grant a waiver that lets it stay with the state alone.¹² For a state with as many community banks and credit unions as ours, a regime sized for smaller issuers may be a reasonable fit.

Wisconsin’s decision now belongs to the 2027 Legislature

Briefing 004 ended with three decisions the study committee left for our next Legislature: whether to define staking in law, whether to pass the commercial code bill, and whether to build a stablecoin framework before the certification deadline. Only the last one comes with a federal date. The staff memo laid out options running from a study to a full framework and described them as “a starting point for topics of discussion that the committee may wish to pursue in considering preliminary bill drafts.” The committee has no further meetings scheduled, so that starting point passes to our 2027 Legislature.¹¹

A study commission is the careful way to do this, and the memo sketches one with seats for the Treasurer, DFI, and industry. If Treasury keeps the conditional option, that path becomes more realistic. Wisconsin could file a conditional certification by January 2028 and keep studying, although nothing would be reviewed or approved until the work was finished and the filing amended. That still leaves something for the Legislature to do first: even a conditional filing has to be signed by a state stablecoin regulator, and a study that reports back late next year would leave little time to name one before the deadline. Some of the groundwork doesn’t need a bill at all. Anyone can comment on Treasury’s certification procedures by November 30, DFI and our legislators included, and the question of which agency would supervise state issuers can be answered well before anyone drafts a regime around it.

I keep coming back to the pattern I described in Briefing 001. When we’ve been handed a national template, we’ve used it, as we did when we rebuilt our money-transmission law around a national model in 2024. When we’ve been shown a documented harm, we’ve answered it, as we did with crypto kiosk fraud. The bills that would have set our own direction on digital assets died. A state stablecoin regime doesn’t fit neatly on either side of that pattern. Washington has written a template, but adopting it would be our own choice, and no harm has forced the question yet. The OCC has finalized its rules, Treasury is still working through its own, and Wisconsin remains free to decide whether a state framework is worth building.

I can see the case on both sides. A Wisconsin framework would give an issuer like my hypothetical startup, or a credit union looking at a coin of its own, the option of a regulator that already supervises our state-chartered banks and credit unions, working under rules Wisconsin helped write, the possibility I raised in Briefing 002. It would also ask DFI, or whichever agency we choose, to build out rules, examination procedures, and staff for a new kind of company. Deciding that isn’t worth it, and that Wisconsin issuers are well served by the OCC and other states’ regulators, would be a legitimate choice. What would be hard to defend is reaching January 2028 without anyone in the Capitol having weighed it at all. If we end up relying on Washington, I’d like it to be because we looked at the options and chose to.

For the GENIUS Act itself, see Briefing 002. For what the study committee heard about stablecoins and staking, see Briefing 004. All of my briefings are at mjsterling.org.