GENIUS Act: FDIC Urged Not to Expand Stablecoin Yield Ban as Senate Weighs CLARITY Act

Crypto firm Paradigm has sent a comment letter to the U.S. Federal Deposit Insurance Corporation (FDIC), urging the regulator not to extend the stablecoin yield ban in the GENIUS Act to third-party firms. This comes as the Senate deliberates on the CLARITY Act, which preserves stablecoin rewards for these third-party firms.

Paradigm Urges FDIC Not To Expand Stablecoin Yield Ban In GENIUS Act

In a comment letter to the FDIC, the crypto firm noted that nothing in the GENIUS Act permits the FDIC to either prohibit third parties from paying yield or to create a rebuttable presumption that such payments violate the Act. The firm further stated that the legislative record confirms that Congress expressly rejected the very proposals that the FDIC is now advancing.

As such, they urged the FDIC to withdraw these “impermissible expansions” of the Act or, at a minimum, incorporate the same limits that the OCC and NCUA propose. Paradigm added that the FDIC should design an enforcement cure period that protects good-faith issuers from agency overreach.

The GENIUS Act notably prohibits stablecoin issuers from distributing yields to holders but doesn’t extend this provision to third-party crypto firms. The CLARITY Act is set to address this issue by preserving activity-based stablecoin rewards, enabling third-party firms like exchanges to distribute yield based on this criterion.

The CLARITY Act is on course to become the second crypto bill that Congress passes after the GENIUS Act. Ripple, Coinbase, and other crypto firms recently pushed for a floor vote for the crypto bill, although the Senate is currently facing a tight schedule.

Other Feedback From The Crypto Firm

Paradigm also urged the FDIC to preserve white-label arrangements, as the GENIUS Act proposal would require stablecoin issuers to maintain separate reserve pools, accounts, and compliance infrastructure for each stablecoin brand. As such, they said the FDIC should permit subledgering, just like what the OCC already does.

Thirdly, the crypto firm asked the regulator to recognize tokenized reserve assets, just as the OCC has already proposed doing. Paradign further urged the FDIC to reduce weekly supervisory reporting to monthly and to codify reporting categories in the rule text.

The firm noted that weekly reporting imposes prohibitive fixed costs, and delegating category definitions to a form that the FDIC can revise without notice-and-comment creates unchecked expansion risk. Lastly, Paradigm stated that the FDIC should clarify the GENIUS Act resolution framework, as the Act doesn’t answer which agency covers a national trust bank.

It is worth noting that other crypto firms have also sent comment letters to the FDIC as the regulator seeks to implement the GENIUS Act. Just like Paradigm, Consensys has pushed for the FDIC to revise the proposed stablecoin rules.

Meanwhile, USDC issuer Circle, in its comment letter, asked the FDIC to make a clear divide between payment stablecoins and tokenized deposits.