Stablecoin Yield Loophole Sparks Regulatory Chaos

The stablecoin market has grown exponentially since the GENIUS Act prohibited issuers from directly paying interest or yield to holders in July 2025.

However, a loophole has emerged where third-party workarounds allow for yield-bearing stablecoins, with the $22.7 billion market growing at roughly 11% per month.

Crypto exchanges like Coinbase, Kraken, and Gemini offer rates above 3.75% APY on USDC through loyalty rewards, funded largely through their revenue-sharing partnerships with issuers like Circle.

The Office of the Comptroller of the Currency has proposed new rules to classify coordinated issuer-affiliate yield payments as prohibited unless the arrangement can be convincingly rebutted as independent.