The opinion editorial below was written by Michael Handelsman for Kelman.Law.
A payments company wants merchants to settle invoices in a dollar stablecoin bearing its name. Before choosing a blockchain or negotiating a per-transaction fee, it should answer one question: When a merchant presents 100,000 tokens for redemption, which legal entity owes the dollars?
If the payments company wants to make that promise itself, it should consider becoming a permitted payment stablecoin issuer. If its strength is reaching merchants and integrating payments into their accounting systems, partnering with an issuer may be a better fit. Both models can put the company’s name on the product, but they provide different levels of control over issuance, involve different costs, and create different obligations when something goes wrong.
Becoming the issuer: federal and state pathways
The GENIUS Act defines a payment stablecoin partly by reference to the issuer’s obligation to redeem, convert, or repurchase the asset for a fixed monetary value. Once the issuer framework takes effect, a business generally must qualify as a permitted issuer to issue a payment stablecoin in the United States. The available route depends on which entity will take on that obligation.
Federal approval. A qualifying nonbank fintech may apply to the Office of the Comptroller of the Currency (OCC) to become a federally qualified issuer. An uninsured national bank or eligible federal branch may also seek OCC approval. An insured depository institution follows a different path: it applies to its primary federal payment stablecoin regulator for approval to issue through a subsidiary. A fintech that banks with an insured institution does not become that bank’s subsidiary simply by signing a services agreement.
Timing matters for a new entrant. As of November 10, the OCC’s application page says it is not yet accepting applications or waiver requests. The prior-approval requirement generally begins January 18, 2027. The OCC’s transition guidance distinguishes existing U.S. issuers with substantially complete applications pending by that date from new entrants, which the agency generally expects to obtain approval before beginning operations. A pending application is not permission to launch.
State approval. An eligible state-qualified issuer with no more than $10 billion in consolidated outstanding issuance may choose supervision under a state regime substantially similar to the federal framework. The threshold applies to tokens outstanding across the issuer, not annual payment volume or sales of a single branded token. Treasury’s state certification procedures address the state’s regulatory regime; approval of an individual issuer is a separate matter. A founder considering this route should confirm both with the proposed home-state regulator. Above the threshold, the Act generally requires a transition to federal oversight within 360 days, unless a waiver is granted.
Either route requires building an issuer able to handle a difficult redemption day. It needs eligible reserves backing outstanding tokens at least one-to-one, access to cash when holders redeem, accurate reserve reports, and staff able to reconcile bank and blockchain records. Direct issuance makes more sense when control of these functions matters commercially and the business can fund them even if adoption is slower than forecast.
Partnering with an issuer: whose coin is it?
In a white-label arrangement, the fintech provides the brand and customer interface, while another entity issues the token and is responsible for redemption. The OCC’s final rule, published October 23, does not limit an issuer to one brand. For issuers under its jurisdiction, however, the rule requires prominent redemption disclosures that identify the actual issuer. When separate reserve pools back different brands, the monthly reporting provisions require separate information about reserve composition. A distinct ticker alone does not tell a merchant whether its token has a separate reserve pool.
Before signing, ask the partner for its exact legal name, its current authority to issue, and its plan for operating after January 18. If the partner expects to obtain an approval or waiver, make launch conditional on proof that it has obtained the required authority. Also examine the fintech’s own role. As Part 3 of this series explains, an issuer’s authority does not automatically extend to a distributor that receives merchant funds, controls wallets, or converts tokens to dollars.
What the agreement must settle before the first mint
Who can create tokens? Suppose a merchant wires $100,000 on Friday afternoon. The fintech receives a transfer notification, but the issuer’s bank has not confirmed receipt. Can the fintech’s software mint 100,000 tokens anyway? The agreement should specify what counts as settled funds, who confirms receipt, and who authorizes the mint. Test those answers against the actual signing permissions, including backup keys and administrator accounts. The issuer’s contractual right to reject a mint is of little value if the distributor can carry it out unilaterally.
How does a holder get paid? A merchant that receives tokens from a customer may not have an account with the issuer. The customer terms should clarify whether the merchant can redeem directly, must first complete onboarding, or has to use an intermediary. Specify fees, cutoff times, when tokens are burned, and who is responsible for payment if the burn succeeds but the bank transfer fails. This is a useful scenario to test before launch: support staff should be able to identify the unpaid claim and the person authorized to resolve it.
Who answers for mistakes and interruptions? Allocate responsibility for screening customers, escalating suspicious activity, responding to lawful orders, and reconciling discrepancies. Give the issuer access to the records needed to oversee delegated work. Negotiate who bears losses from an unauthorized mint, compromised key, or erroneous payout. An indemnity may allocate a loss between the companies, but it cannot transfer a statutory duty or ensure a merchant can access dollars during an outage.
What happens when the partnership ends? Halting new mints is relatively simple. Outstanding tokens may remain in wallets neither company controls. The agreement should allocate and fund ongoing redemptions, customer notices, record retention, and technical support. If the fintech can switch issuers, establish how holders will distinguish old tokens from new ones and who remains responsible for each. Replacing a vendor is far less valuable if no one has agreed to service tokens issued in the past.
Frequently asked questions
Do we need a branded token to offer stablecoin payments? No. A fintech can integrate an existing token if the goal is settlement rather than issuance. This avoids creating a new redemption obligation, although custody, exchange, and transfer services still need their own licensing analysis.
Can we outsource reserve management if we become the issuer? Yes, subject to applicable requirements. The OCC’s final rule allows covered issuers to hire advisers for reserve management. The issuer still needs oversight, reliable reporting, and access to enough liquidity to meet its own obligations.
What should we ask a prospective issuer to demonstrate? Ask the prospective issuer to demonstrate one mint, one redemption, and one failed payout using the proposed accounts, contracts, and signing permissions. Compare that demonstration with what the merchant will see on screen. If the documents, software, and customer promise point to different decision-makers, resolve the mismatch before launch.
If your company is weighing direct issuance against a white-label arrangement, you can contact Kelman PLLC to discuss the proposed funds flow, issuer authority, and terms governing minting and redemption.
Attorney Advertising. This article provides general information, not legal advice.
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