BPInsights: October 4, 2025

Paying Interest on Stablecoins: Setting the Record Straight

A new media campaign led by Coinbase and the Blockchain Association presents misleading claims about the banking industry, the current law on stablecoin regulation (the GENIUS Act), and the intended scope of market structure legislation.

Most banks and crypto companies have common goals: to innovate, serve their customers and help grow the economy. A misleading "banks vs. crypto" narrative and references to "bailouts" - deeply ironic given that a Coinbase partner (Circle) was the largest beneficiary of the Silicon Valley Bank rescue - make it harder to achieve consensus on policies that both encourage competition and address financial stability risks.

• The GENIUS Act makes it illegal for stablecoin issuers to pay interest. It does not prevent an evasion of that law whereby crypto exchanges or affiliates pay interest indirectly on behalf of a stablecoin issuer.
• Stablecoin "rewards" are interest payments.
• Rewards on credit cards are not like interest paid on a deposit account.
• Banks and crypto firms are both pro-competition and are already partnering extensively to improve the customer experience.
• Bank-like stablecoins without full regulatory protections put the financial system at risk. They are less regulated cousins of the money market mutual funds that required a bailout in 2008 and again in 2020. If the crypto industry wants "no more bailouts," they should support guardrails against the true bailout risk in this debate: pseudo-banks operating without adequate safeguards.

Learn the facts here.

Five Key Things

1. Hill Nominated as Permanent FDIC Chair

President Trump this week nominated Acting FDIC Chairman Travis Hill to be permanent chair of the regulatory agency. Hill has served on the FDIC's board since 2023 and previously worked as an advisor to former Chair Jelena McWilliams. He has advanced various priorities as acting chair, including supervisory reform, eliminating barriers to innovation and improving the bank merger review process.

2. Plaintiffs And Federal Reserve Move To Extend Stay In Stress Test Litigation Until November 12

The Plaintiffs and Federal Reserve filed a joint motion to extend a stay in litigation challenging the Federal Reserve's stress testing framework. The joint motion, filed late Tuesday night between the Federal Reserve and a coalition of bank and business groups, requests that the Court extend a pause in the case from October 15 to November 12 or the date on which the plaintiffs file their next brief, whichever is sooner.

"The Federal Reserve acknowledges that more work remains to meet its public commitments," the plaintiffs stated. "Capital requirements affect America's economic competitiveness, which is why we support the Federal Reserve's diligent work toward a more transparent and rational capital framework."

3. Unlocking the Discount Window

The 2023 banking turmoil underscored the need to ensure banks are ready and able to use the Federal Reserve's discount window. The discount window is an important source of banking system liquidity, so its role should be reflected in banks' liquidity requirements. A new BPI blog post recommends how liquidity requirements should account for banks' capacity to borrow from the discount window. By incorporating the discount window into liquidity requirements, the banking agencies can free up trapped liquidity, ensure banks are ready to borrow as needed, reduce ingrained discount window stigma and more accurately reflect a bank's liquidity position.

4. As Cybersecurity Awareness Month Begins, BPI Calls for Strengthening Resilience

Oct. 1 marked the start of Cybersecurity Awareness Month, a Cybersecurity and Infrastructure Security Agency (CISA) initiative launched in 2004 to improve awareness of cyber threats and actions needed to maintain the security and resilience of America's 16 critical infrastructure sectors, including banks.

Banks have long been considered the gold standard of cybersecurity and information-sharing. The industry abides by more stringent data security and privacy protection standards than many other industries and has developed sophisticated systems to detect, prevent and respond to cyber threats.

Some of the requirements include:

• The Gramm-Leach-Bliley Act;
• FFIEC IT Examination Handbook;
• The Fair Credit Reporting Act;
• The Right to Financial Privacy Act; and
• State and International Data Security and Privacy Laws.

Despite these safeguards and significant investments from industry, cyberattacks are growing in scale and sophistication, driven by complex criminal networks and hostile nation-states. As a result, cyberthreats continue to be a top concern among bank leadership, regulatory agencies and other sectors of the economy.

Throughout October, our experts will share new insights on cybersecurity. To keep up with the latest and to learn more, visit our cybersecurity page here.

• Closing a Cyber Protection Gap. Also this week, on Oct. 1, a crucial 2015 cyber protection law (the Cybersecurity Information Sharing Act) expired, leaving the financial sector and other critical infrastructure industries vulnerable to heightened risk of hacks and breaches. BPI has urged Congress to reauthorize this legislation promptly so that banks and other critical infrastructure firms can share vital threat information amongst themselves and government authorities under a safe harbor without legal uncertainty or liability concerns. "America is more vulnerable to cyber threats today than it was yesterday," Heather Hogsett, executive vice president for technology policy and head of BITS at BPI, told Cybersecurity Dive on Oct. 1, the day the law lapsed.

5. Supervision Proposals on FDIC Agenda Next Week

The FDIC board will hold an open meeting on Tuesday, Oct. 7, to issue two supervision-related proposals - one on prohibiting use of reputational risk by examiners, and another on unsafe or unsound practices and Matters Requiring Attention. These topics are important aspects of the banking agencies' ongoing efforts to reform bank supervision. OMB's website indicates proposals on the same topics are forthcoming from the OCC as well.

• Reputational Risk. Acting FDIC Chairman Travis Hill has said in previous statements that the FDIC is working on a rule that would "prohibit FDIC supervisors from (1) criticizing or taking adverse action against institutions on the basis of reputational risk and (2) requiring, instructing, or encouraging institutions to close, modify, or refrain from offering accounts on the basis of political, social, cultural, or religious views." Hill has also flagged work on "a number of options to reform and better focus supervision." OCC Comptroller Jonathan Gould noted at a recent FSOC meeting that the OCC plans to issue rules to eliminate the use of reputational risk and define key supervisory concepts, like unsafe and unsound practices. "We will also be raising concerns of redundant supervision with the other federal banking agencies, whether around specific topics like cyber or where other agencies are not appropriately deferring to functional regulators as required by law," Gould said.

In Case You Missed It

The Crypto Ledger

Here's what's new in crypto.

• Bloomberg: Stablecoins Without Bank Charters Should 'Stay in Their Lane.' A Bloomberg editorial this week flagged the risks posed by stablecoins luring deposits out of the banking system without bank regulatory safeguards. "Although Congress has banned them from paying interest, the 'rewards' they offer might have a similar effect," the editorial said. "It's essential to hold the line between offering rewards for payments (like credit cards) and doing the same for holding deposits (like banks)." The editorial called for crypto firms to apply for bank charters if they wish to compete for deposits. "Until then, regulators should ensure they stay in their lane. With the right guardrails in place, stablecoins should be free to spur innovation and keep the money moving."
• Bailey on Stablecoins. In a Financial Times op-ed this week, Bank of England Governor Andrew Bailey explained how payment stablecoins can preserve trust in money. The assets backing stablecoins should be risk-free; stablecoins should be protected by an insurance scheme and resolution arrangement; and stablecoins' terms of exchange should be "known, consistent and enduring." "The technology behind stablecoins is new. But, as we shape a regime that can put the UK at the forefront of exciting innovation, we should ask a question that has long been at the heart of central banking: how do we ensure the link between money (in whatever form) and credit creation as an underpinning for economic activity?" Bailey wrote. The Bank of England will soon publish a consultation paper on the UK's "systemic stablecoin regime, he noted. The proposal will set out that "widely used UK stablecoins should have access to accounts at the BoE in order to reinforce their status as money," he said.
• Guilty Plea in Potentially 'World's Largest' Crypto Seizure. Chinese citizen Zhimin Qian pleaded guilty this week in the UK to a multibillion-dollar bitcoin scheme, amounting to what is potentially the "world's largest" crypto seizure, more than $7.3 billion. Qian, also known as Yadi Zhang, is accused of orchestrating a massive fraud scheme in China between 2014-2017.
• SEC Gives Crypto Custody Nod To State Trust Companies. The SEC division of investment management issued a no-action letter advising that it would not recommend enforcement action to the Commission against a Registered Adviser or Regulated Fund for using a state trust company that meets certain requirements to custody cryptoassets.

FinCEN Seeks Comment on Compliance Costs Survey

The Treasury Department's Financial Crimes Enforcement Network (FinCEN) is seeking public comment on a proposed survey of anti-money laundering compliance costs for nonbank financial institutions, according to an announcement late last week. The institutions to be surveyed include nonbank lenders, dealers in precious metals, insurance companies and money services businesses. FinCEN said the results will be used to "shape deregulatory proposals." Treasury has previewed an overhaul of the AML framework more broadly.

Traversing the Pond

Here's the latest in international banking policy.

• Stablecoins Under Scrutiny. The European Systemic Risk Board recommended banning multi-issuance stablecoins - those issued jointly both within and outside the EU. The recommendation is not legally binding but could exert pressure on European authorities. It carries implications for how major stablecoin issuers operate in the EU.
• Basel Committee Meeting. The Basel Committee on Banking Supervision held a virtual meeting this week, where members approved the results of an end-of-year assessment for GSIBs, discussed the grading used for its jurisdictional assessments and discussed a report on the implementation of margin requirements for non-centrally cleared derivatives. According to a Bloomberg article shortly before the meeting, the Federal Reserve was seeking to repeal a decision to treat the eurozone as a single domestic market when assessing banks' cross-border exposures, a measure with important capital implications for internationally active European banks.
• Fewer Buffers. The European Central Bank plans to propose reducing the number of capital buffers for banks, as well as introducing simpler rules for smaller banks, according to the ECB's vice president Luis de Guindos this week.
• The Complexity of Simplification. European Parliament procedures are adding complexity to the European Commission's effort to "simplify" regulatory requirements in the bloc, according to the Financial Times, citing frustration from EU governments. Some government officials have expressed concern about how omnibus simplification bills "bundle together laws in a way that clashes with parliamentary procedures," according to the article.
• Competition in Focus. POLITICO held a Competitive Europe summit this week on Oct. 1-2 in Brussels featuring members of European Parliament, financial industry executives and other senior EU officials. Learn more here.

Bank Of America Commits over $1 Million to Support Hill Country Flood Recovery

Bank of America has pledged over $1 million to LiftFund, a leading nonprofit small business lender, to support small businesses affected by severe floods in Texas' Hill Country region. Learn more here.