DeFi platforms have opposed the plans to ban stablecoin yield via third-party apps.
In a comment to the OCC (Office of the Comptroller of the Currency), Phantom Wallet and Consensys slammed the agency for going against the stablecoin law, the $GENIUS Act.
Marisa Tashman Coppel, assistant general counsel at Phantom, argued that the $GENIUS Act only bans stablecoin issuers from offering interest. This is meant to prevent them from functioning as uninsured deposits.
However, she added that the OCC’s proposal to extend the ban to third parties goes ‘beyond what the statute says.’
The OCC’s anti-evasion authority doesn’t give it a blank check to rope in unrelated parties acting on their own commercial judgment.
Stablecoin yield fight extends to the $GENIUS Act
Here, critics argue that stablecoins deposited in DeFi are active investments. So if the user puts $USDC into a venue like Aave, the yield accrued is from the DeFi venue.
Similar to other deposited assets, like BTC, it comes with risk. So the yield is not from Circle, the issuer of $USDC.
As such, third parties, especially DeFi platforms with such arrangements aimed at competing for customers, shouldn’t be targeted. Consensys, the firm behind the MetaMask wallet, supported the Phantom, noting that,
The $GENIUS Act itself carves non-custodial software interfaces out of regulated intermediary status. The final rule should confirm this applies to DeFi access as well.
Consensys called for the OCC to differentiate between ‘user incentives’ and ‘yield,’ adding that,
Congress drew this line deliberately, and twice rejected amendments that would have extended the prohibition to non-issuers. The OCC’s rule should respect that line.
The $GENIUS Act was passed into law last July and should be implemented by July this year. Relevant regulators, including the OCC, have begun rulemaking to beat the deadline.
However, the stablecoin yield issue, which has derailed the broader crypto market structure bill, the CLARITY Act, is now being raised during the rulemaking process of the $GENIUS Act.
For banks, this was good news. In their letter to OCC, the American Bankers Association (ABA) said,
The OCC should issue a broad prohibition because Congress required one, and because the evidence shows that anything less will not work.
In part, this is why the crypto industry accepted the recent stablecoin yield compromise. For the sector, the deal would still have the interest via third parties intact. Whether the latest update will be a deal breaker remains to be seen.
Final Summary
- Phantom and Consensys have slammed the OCC for overreach amid a proposed broader ban on stablecoin yield on third parties.
- Bankers are supporting OCC’s broader stablecoin yield prohibition, warning that ‘anything less will not work.’
