Who Keeps the Interest? Stablecoin Yield Rules in 2026

The $292 billion question nobody prints on the coin

Roughly $292 billion sits inside stablecoins today, dollar-pegged tokens that move value around the clock without a bank in the middle. More than 99% of that supply tracks the US dollar, led by Tether’s USDT at about $184 billion and Circle’s USDC at about $73 billion, according to CoinGecko. Every one of those tokens is supposed to be backed, more or less, by something that earns interest: short-term US Treasury bills, overnight repurchase agreements, cash parked in a government money market fund. At today’s rates that backing throws off real money. The question that quietly defines stablecoin regulation in 2026 is deceptively simple. Who gets to keep it?

The answer, under both the US GENIUS Act and Europe’s MiCA framework, is: not you. The holder of a payment stablecoin is entitled to redeem one token for one dollar, and to nothing else. The interest earned on the reserve belongs to the issuer. That single design choice sorts the entire industry into winners and losers, drives a multibillion-dollar lobbying war in Washington, and explains why a product marketed as a better dollar pays you less than the checking account you already resent. It also explains why a second category of tokens, the yield-bearing stablecoins that do pay a return, lives in a completely different legal universe policed by the Securities and Exchange Commission.

This piece walks through the rule itself, the economics it creates, the loophole that lets exchanges pay rewards anyway, the fight over whether to close it, and the parallel battle playing out in Brussels. If you hold a stablecoin, or you are tempted by one advertising 4%, it is worth understanding exactly what the law lets you earn, what it does not, and who is collecting the difference.

What a payment stablecoin actually is

A stablecoin is a crypto token engineered to hold a fixed value, almost always one US dollar. The dominant model is fully reserved: for every token in circulation, the issuer claims to hold a dollar or a dollar-equivalent asset in reserve, and promises to redeem tokens for cash on demand. USDT and USDC both work this way. A smaller family, the collateralized-debt-position coins such as DAI and its successor USDS, are minted against crypto collateral locked in smart contracts rather than against a bank account. A third family, algorithmic stablecoins, tried to hold the peg with code and incentives alone; TerraUSD was the largest, and its $40 billion collapse in May 2022 is the reason regulators now treat the word algorithmic as a warning label rather than a feature.

The GENIUS Act, signed into law on 18 July 2025, invented a precise legal term for the mainstream version: the payment stablecoin. To qualify, a token must be redeemable at a fixed monetary value, marketed as a means of payment or settlement, and crucially, it must not be structured to pay the holder a return. That last condition is not a footnote. It is the dividing line Congress drew between money and an investment. A payment stablecoin is meant to behave like a digital banknote, something you spend and settle with, not something you buy to grow. The moment a token promises yield, it stops being a payment stablecoin in the eyes of US law and becomes something the SEC is far more interested in.

That distinction matters because it decides which rulebook applies. Payment stablecoins answer to a banking-style regime run by the Office of the Comptroller of the Currency, state regulators, and the Treasury. Yield-bearing tokens answer to securities law. The same green dollar sign on the logo can hide two entirely different legal animals, and telling them apart starts with one question: does it pay you to hold it?

The no-yield rule, in plain English

The core provision lives in Section 4(a)(11) of the GENIUS Act. It bars a permitted payment stablecoin issuer from paying holders any form of interest or yield, in cash, tokens, or other consideration, solely in connection with holding, using, or retaining the stablecoin. The text of the statute is public in the Senate record for S.1582. In plain terms: the company that mints your USDC cannot send you a cut of what it earns on the reserve, full stop.

Congress did not write this by accident. The Senate Banking Committee’s own explainer on the GENIUS Act frames the ban as the thing that keeps a stablecoin a payment tool rather than a shadow bank account. The worry is deposit disintermediation: if a token both spends like cash and pays interest like savings, millions of people and businesses move idle balances out of banks and into stablecoins, and the banks that fund small-business and mortgage lending lose the cheap deposits they rely on. The no-yield rule is, bluntly, a protection for the banking system, written into a crypto law.

Europe reached the same destination by a different road. Under MiCA, the issuer of an e-money token (the category that covers single-currency coins like USDC and EURC) is forbidden from granting interest, a prohibition set out in Article 50; the parallel rule for asset-referenced tokens sits in Article 40. The European ban is arguably even blunter: it explicitly says any interest or benefit linked to how long a holder keeps the token is off limits. Two continents, two legal traditions, one identical outcome. Your stablecoin, by law, pays you zero. This is the quiet common ground beneath the better-known transatlantic split that our companion piece on the two rulebooks converging in January 2027 lays out in full.

The float: how issuers earn billions while holders earn nothing

To see why the no-yield rule is worth fighting over, follow the money it sets aside. When you buy a stablecoin, you hand the issuer a real dollar and receive a token. The issuer invests that dollar in safe, liquid instruments, overwhelmingly short-dated Treasury bills and government money market funds, and pockets the interest. The pile of customer dollars is called the float, and after a stretch of high rates the float has become one of the most profitable businesses in finance. Circle’s own reserve vehicle, the government money market fund that holds the bulk of USDC backing, was yielding close to 4%, tracking the short-term Treasury rates that stablecoin reserves are built on. On roughly $73 billion of USDC, that is well over $2 billion a year in gross reserve income before costs.

Tether makes Circle look modest. In its second-quarter 2026 attestation, the company reported about $1.5 billion in net operating profit for the quarter, even as its excess-reserve buffer fell by roughly half to $4.11 billion, as CoinDesk reported. With something like $141 billion parked in Treasuries and repo, Tether’s reserve throws off on the order of $6 billion a year at current rates. None of that reaches the person holding the token. It flows to the issuer’s balance sheet, where Tether has used it to buy Bitcoin, gold, and even stakes in other companies. The holder provided the capital; the issuer keeps the coupon.

Washington does not see this as a scandal. It sees a customer. Treasury Secretary Scott Bessent has repeatedly argued that implementing the GENIUS Act is, in his words, essential to securing American leadership in digital assets, and that a growing stablecoin market will drive a surge in demand for US government debt, with forecasts running into the trillions of dollars by the end of the decade, a case he laid out in comments reported by The Defiant. In that framing, the no-yield rule is a feature: it keeps stablecoins cheap to run, points the float straight at the Treasury market, and discourages the deposit flight that would alarm banks. The holder earning nothing is not a bug. It is the quiet price of the deal.

There is a catch that keeps issuers honest about the backing. Because holders carry all of the credit and liquidity risk and none of the upside, the only real protection is that the reserve is genuinely there and genuinely safe. That is why reserve attestations, and the difference between a monthly attestation and a full audit, matter so much; we unpack that gap in our look at the audit firms investors are supposed to trust. A stablecoin that pays no yield but cannot prove its reserves is the worst of both worlds.

Who keeps the yield on a stablecoin dollar

The rule only speaks directly to one party, the issuer. Everyone else in the chain sits in a greyer zone. The table below maps who earns what when a dollar of stablecoin backing earns interest, and what the law currently says about each.

The Coinbase-shaped hole

Here is where the clean rule gets messy. Section 4(a)(11) forbids the issuer from paying yield. It does not, in its plain words, forbid an exchange from doing so. And that gap is where most of the yield US stablecoin holders actually receive comes from. Coinbase and Kraken both run rewards programs that credit users a percentage simply for holding USDC on their platforms, with Coinbase advertising rates around 4% and Kraken around 5% through late 2025. To the user it looks exactly like interest. Legally, the exchanges insist, it is not.

The argument is narrow and, so far, effective. Coinbase takes what regulators have called a minimalist reading: the law bans an issuer from paying yield, so a third party sharing its own revenue with customers is permitted, as long as the issuer is not the one paying holders solely for holding the coin. The rewards are funded by a revenue-sharing arrangement with Circle, which pays distribution partners a cut of the interest Circle earns on the USDC reserve. The sums are not small. Coinbase’s stablecoin revenue reached about $1.35 billion in 2025, up from $910 million the year before, making it the company’s second-largest revenue line after trading fees, according to CoinDesk. Circle’s own April 2025 public filing disclosed roughly $1 billion in distribution and transaction costs for 2024, the bulk of it flowing to Coinbase, a split detailed in reporting by Yahoo Finance.

Not everyone thinks the loophole is Coinbase’s crown jewel. Owen Lau, an analyst at Clear Street, told CoinDesk that the Washington threat to the rewards model is real but survivable: it is, he said, important, but it’s not even close to existential. Coinbase has other revenue, and the structure can bend. Still, the arrangement is the clearest example of a pattern that recurs across crypto: the letter of a prohibition is obeyed while its purpose is routed around. The issuer does not pay you. The issuer pays the exchange, and the exchange pays you. The dollar of interest arrives; it just takes one extra hop.

Brian Armstrong, Coinbase’s chief executive, has made the moral case for going further. He has argued that Congress should simply let stablecoins pay holders directly, what he calls onchain interest, and that doing so would let the average person, and the US economy, reap the full benefits. In remarks to CNBC he noted that consumers could earn roughly 4% on their holdings, against a 2024 average savings-account yield he put at 0.41%. From where he sits, the no-yield rule is not consumer protection. It is a subsidy to banks, paid by savers who never see the money.

Washington’s deposit war

The banks see it in exactly reverse, and they have spent 2026 saying so loudly. More than forty banking trade groups, led by the American Bankers Association, have pressed Congress and regulators to slam the loophole shut by extending the interest ban to affiliates and exchanges, not just issuers. Their fear is deposit disintermediation at scale: if a stablecoin can be both spent and effectively saved at 4%, the cheap deposits that fund community lending walk out the door. The Independent Community Bankers of America put concrete numbers on it in the GENIUS rulemaking comments. If yield is cleanly prohibited, the group estimated community-bank lending would fall by about $141 billion, or roughly 4%. If issuers are instead allowed to route yield through third parties, the ICBA warned, the hit could reach $850 billion, equivalent to placing at risk roughly one in five dollars community banks currently lend, as American Banker reported.

The crypto side answers with its own arithmetic. Coinbase has cited a White House analysis suggesting a full prohibition would increase bank lending by a mere $2.1 billion while imposing around $800 million a year in net welfare costs on consumers who lose access to rewards. The Congressional Research Service laid out the whole standoff for lawmakers in a briefing bluntly titled The Stablecoin Yield Debate, which frames the fight as a straight contest between bank deposit franchises and a new class of payment tokens. Both sides agree on the mechanism. They disagree, by hundreds of billions of dollars, on the magnitude.

The politics turned sharp when banks pushed to reopen the GENIUS Act itself to close the loophole by statute. Armstrong called any reopening a red line and accused the banking lobby of trying to kneecap fintech competition, a stance reported across the trade press including Crypto News. For now the legislative route is stalled anyway: the CLARITY Act, the broader market-structure bill that would have tightened the yield language, failed a Senate cloture vote 49 to 50 on 15 September 2026, eleven votes short of the sixty needed, as The Crypto Times noted. With Congress gridlocked, the action moved to the agency that writes the rules for the largest issuers.

The OCC moves to close the hole

Under the GENIUS Act, the Office of the Comptroller of the Currency is the federal regulator for the biggest payment stablecoin issuers, the ones above the $10 billion line that cannot opt into a state regime. That makes the OCC’s rulebook the practical battleground for the yield question, and in a proposed rule circulated in February 2026 the agency took the banks’ side of the argument, at least partway. The proposal would stretch the prohibition beyond the issuer to reach affiliates and related third parties, attacking the exact structure that lets an exchange pay rewards on an issuer’s coin.

The mechanism is a rebuttable presumption. Rather than banning every third-party reward outright, the OCC would presume that a coordinated arrangement between an issuer and an affiliate to pay holders a return is itself a prohibited yield scheme, and put the burden on the parties to prove otherwise. American Banker’s reporting on the comment file describes exactly this rebuttable standard, with banks pressing the agency to go further and treat any economic benefit tied to custody as prohibited interest. In other words, the OCC is trying to write into regulation what Congress left ambiguous in statute: that you cannot dodge the no-yield rule simply by adding a middleman.

Whether it holds is an open question on two fronts. First, a rebuttable presumption invites exactly the kind of creative structuring crypto firms excel at, loyalty points, activity-based payments, marketing credits, each engineered to look like something other than interest on a balance. Second, there is a timing problem. The GENIUS Act’s core provisions take effect on 18 January 2027, and Comptroller Jonathan Gould has told PYMNTS he wants a final rule out by November 2026 so issuers have a runway. If the final rule lands softer than the proposal, the Coinbase-shaped hole survives in a narrower form. If it lands hard, expect litigation. Either way, the no-yield rule in practice will be defined less by the words Congress passed than by how aggressively one agency chooses to read them.

The stablecoins that do pay, and why they are securities

If payment stablecoins cannot pay yield, how do the tokens advertising 4% and 5% exist? The answer is that they are not payment stablecoins at all, legally speaking. They are a different product wearing similar clothes, and most of them are securities. By choosing to pay a return, an issuer steps outside the GENIUS Act’s payment-stablecoin definition and into the arms of the SEC.

The cleanest example is YLDS, which Figure launched in February 2025 as the first yield-bearing stablecoin registered with the SEC as a public security. YLDS is not a bank deposit, not a redemption claim, and not a money market fund share; it is a tokenized face-amount certificate issued by Figure Certificate Company, an investment company registered under the Investment Company Act of 1940, paying holders around 3.85%, a structure the company explains in its own breakdown of YLDS and that Cointelegraph covered at launch. The point of registering is precisely to be allowed to pay, something the payment-stablecoin rulebook forbids. YLDS buys its legality by accepting securities-law obligations: disclosures, investor-eligibility checks, and the compliance overhead a plain payment token escapes.

Other yield-bearing tokens reach the same return by different routes, each with its own legal posture. Ondo Finance’s USDY is backed by short-term Treasuries and bank deposits and pays roughly 4% to 5%, but it is offered to non-US investors to sidestep American securities rules. Ethena’s USDe, with a market value near $4.8 billion, generates something like 4% by harvesting the funding payments longs pay shorts in the perpetual-futures market, a yield source you can only understand once you know how perpetual futures and their funding rates work; its staked version, sUSDe, is where the return actually accrues. Savings wrappers such as sUSDS and sDAI do something similar inside DeFi, passing protocol revenue to holders who lock the base coin. A useful 2026 primer from crypto.news catalogs the designs. What unites them is that the return is never free: it is credit risk, derivatives risk, or smart-contract risk, wearing the costume of a stable dollar.

Where the SEC draws the line

For the English-speaking reader trying to work out which regulator owns a given token, the yield question is the decoder ring. The Securities and Exchange Commission set out the logic in an April 2025 staff statement on what it called covered stablecoins: tokens fully backed one-for-one by dollars, non-interest-bearing, and used purely to make payments do not meet the definition of a security. Pay no yield, behave like cash, and you fall outside the SEC’s remit. The GENIUS Act then hard-coded that result, carving payment stablecoins out of the statutory definition of a security altogether.

The SEC and the Commodity Futures Trading Commission reinforced the boundary with a joint interpretation on 17 March 2026, sorting crypto assets into categories and confirming that payment stablecoins are not securities, a move law firm Norton Rose Fulbright summarized for clients. SEC Chair Paul Atkins framed it as the end of a long drought, saying the agencies were giving the market, after more than a decade of uncertainty, a clear understanding of how the Commission treats crypto assets. The through-line is consistent: a dollar token that only ever equals a dollar is plumbing, and plumbing is a banking matter.

Flip the yield switch and the classification flips with it. A token that pays a return is, almost by definition, offering holders a profit from the efforts of others, the classic test for an investment contract. That is why YLDS registered as a security and why most yield-bearing tokens either register, restrict themselves to non-US users, or operate in the grey. For holders this is not a technicality. A payment stablecoin gives you a redemption claim and the GENIUS Act’s reserve protections. A yield-bearing token gives you a securities-law relationship, with disclosures and eligibility gates but also, potentially, the risk profile of a fund rather than a dollar. The 4% is real. So is the different set of things that can go wrong.

Europe’s parallel fight, and a harder line

The European Union banned issuer interest first and is now debating whether to ban far more. MiCA’s Articles 40 and 50 already stop an issuer from granting interest on asset-referenced and e-money tokens, and they are read narrowly: the prohibition binds the issuer, not third parties. Under the current text, Circle cannot pay interest on EURC, but a lending protocol like Aave can accept EURC deposits and generate a yield for depositors without breaching the article. Europe, in other words, has its own version of the Coinbase-shaped hole, sitting in DeFi rather than on a centralized exchange.

Europe’s central bankers want it closed, and then some. In a 57-page response to the European Commission’s MiCA review, filed on 22 September 2026, the European System of Central Banks urged that the yield ban be widened to catch indirect returns of every kind, applying whether the return comes directly from the stablecoin issuer or through lending, staking or another layered product, as reported by Unchained. That would reach exchanges, DeFi protocols, and any intermediary dangling a return on a stablecoin balance, the kind of blanket prohibition the US has pointedly declined to enact. The proposal proved unpopular with the people it would affect: more than 50,000 EU citizens filed letters opposing it before the consultation closed on 30 September 2026. The Commission must report back to Parliament and Council by 30 June 2027, so the fight is far from settled.

The European line is harder than the American one in another way too. Because USDT never sought MiCA authorization, it has been off regulated EEA venues for retail since the transition period ended on 1 July 2026, leaving compliant coins like USDC and the small euro token EURC to fill the gap. EURC is the largest euro-denominated stablecoin and still amounts to under 0.2% of the global market. Brussels is betting that strict rules build trust; the risk it runs is that a holder told they can earn nothing, anywhere, simply moves to the offshore venues no European regulator can see. A ban that is too wide can push the very activity it targets into the dark.

GENIUS and MiCA on yield, side by side

The two biggest rulebooks start from the same prohibition and diverge on everything downstream: who else the ban reaches, where yield-bearing tokens land, and which regulator holds the pen. The table below lines them up.

What it means if you hold stablecoins

Strip away the legislative detail and a few practical truths fall out for anyone holding a dollar token today. The first is that any yield you earn is a rebate of interest the issuer collected on your own money, handed back to you by a middleman who chose to, not by right. An exchange reward is discretionary. It can be trimmed, gated behind tiers, or switched off, and if the OCC’s rule lands hard it may be switched off by law. It also tracks the Fed: the 4% that looks generous today shrinks with every rate cut, because the float it comes from shrinks too.

The second truth is that yield has a location, and location is risk. To collect an exchange reward you usually have to leave your coins in the exchange’s custody, which means the reward rides on the platform’s solvency, not just the issuer’s. To collect DeFi yield you deposit into a smart contract, taking on code risk, liquidation risk, and the quieter hazard of value being skimmed through price-feed and ordering games, the kind of extraction we described in our piece on the exploit DeFi made legal. To hold a yield-bearing token you accept the risk profile of whatever generates the yield, Treasuries, derivatives funding, or protocol revenue, and the chance that the token itself slips its peg under stress. There is no version of stablecoin yield that is simultaneously high, safe, and free.

The third truth is the simplest. If you self-custody a plain payment stablecoin, holding USDC in your own wallet rather than on a platform, you earn exactly nothing, by design, while the issuer keeps the interest on the dollar you deposited. That is the clearest illustration of who the no-yield rule actually favors. It is also worth remembering that the reward matters less as these tokens become something you spend rather than park; as wallets start paying and settling on your behalf, a theme we explored in how wallets now spend without you, the value of a stablecoin is shifting back toward being money, not a yield instrument. And in most jurisdictions, including the US, any reward or DeFi yield you do receive is taxable income, so the headline rate is not the rate you keep.

The road ahead

The no-yield rule itself is settled on both sides of the Atlantic. The fight from here is about the edges: whether the prohibition reaches past issuers to exchanges and DeFi, and how hard regulators are willing to police the difference between a reward and interest. Three things are worth watching. The OCC’s final rule, targeted for November 2026, will decide whether the Coinbase-shaped hole narrows or survives. The European Commission’s MiCA review, reporting by 30 June 2027, will decide whether the ESCB’s push to ban indirect yield everywhere becomes law. And the Federal Reserve will decide, indirectly, how much anyone cares: if rates keep falling, the float shrinks, the rewards shrink with it, and a war over billions cools into a skirmish over millions.

The deeper tension will not resolve on any calendar. Stablecoins were sold as a better dollar, and in many ways they are: faster, programmable, global, and available at midnight on a Sunday. But the economics that make them profitable to issue depend on holders not sharing in the yield, and the rules that keep them safe for the banking system depend on the same thing. A product this useful that pays its users nothing is an unstable political equilibrium. Expect the loophole, the lobbying, and the lawyering to continue for as long as short-term Treasuries pay more than zero.

Frequently Asked Questions

Can stablecoins legally pay you interest in 2026?

A payment stablecoin cannot. Under Section 4(a)(11) of the US GENIUS Act and Articles 40 and 50 of the EU’s MiCA, the issuer is barred from paying holders any interest or yield. Exchanges can still offer rewards through a revenue-sharing loophole, and separate yield-bearing tokens do pay a return, but those are regulated as securities rather than as payment stablecoins.

Why does my USDC not earn yield when I hold it?

Because the law lets the issuer keep the interest earned on the reserve behind the coin. Circle invests the dollars backing USDC in short-term Treasuries and money market funds and pockets the yield. You only receive a return if a platform such as Coinbase chooses to share part of that revenue with you as a reward; if you hold USDC in your own wallet, you earn nothing.

Are Coinbase USDC rewards allowed under the GENIUS Act?

For now, yes. The GENIUS Act’s yield ban applies to issuers, not to exchanges, so Coinbase argues its rewards are permitted because Circle is not the one paying holders. The Office of the Comptroller of the Currency has proposed a rule that would presume coordinated issuer-affiliate reward arrangements are prohibited yield, so the loophole could narrow once a final rule takes effect.

Are yield-bearing stablecoins considered securities?

Usually yes. Paying a return takes a token outside the payment-stablecoin definition, and US regulators generally treat anything that pays yield on a dollar token as a security or fund interest. Figure’s YLDS is registered with the SEC as a security; other tokens such as Ondo’s USDY restrict themselves to non-US investors, and Ethena’s USDe derives its return from derivatives funding rather than a simple reserve.

Is earning yield on stablecoins safe?

No stablecoin yield is free of risk. Exchange rewards depend on the platform staying solvent and can be reduced or withdrawn at any time, DeFi yield carries smart-contract and liquidation risk, and yield-bearing tokens carry the credit, derivatives, or depeg risk of whatever generates the return. In most countries, including the US, any yield you receive is also taxable income.

Anneke de Vries covers crypto regulation and policy for HOGE Wire.