Paradigm Tells FDIC: Hands Off the Yield, Bro 🤝

Crypto investment firm Paradigm has urged the U.S. Federal Deposit Insurance Corporation (FDIC) to refrain from extending the stablecoin yield ban contained in the GENIUS Act to third-party crypto firms, according to a comment letter addressed to the regulator. The letter was filed as the Senate continues deliberations on the CLARITY Act, which is designed to preserve stablecoin rewards distributed by third parties.

In its filing, Paradigm argued that nothing in the GENIUS Act authorizes the FDIC to prohibit third parties from paying yield or to establish a rebuttable presumption that such payments violate the statute. The firm stated that the legislative record confirms Congress expressly rejected the very proposals the FDIC is now advancing. Paradigm urged the FDIC to withdraw these "impermissible expansions" of the Act or, at a minimum, incorporate the same limits proposed by the Office of the Comptroller of the Currency (OCC) and the National Credit Union Administration (NCUA).

Paradigm also recommended that the FDIC design an enforcement cure period that protects good-faith issuers from agency overreach. The GENIUS Act prohibits stablecoin issuers from distributing yields to holders but does not extend that provision to third-party crypto firms. The CLARITY Act is structured to address this gap by preserving rewards offered through such intermediaries.

The FDIC's comment window and any subsequent rulemaking will determine how broadly the yield restrictions are applied, while the Senate's progress on the CLARITY Act will shape the final regulatory perimeter for stablecoin rewards distributed by entities outside the issuer framework.