By 
"Interest does not stop being interest merely because it is given a different name."
Hey, it's Marc.
On Tuesday I wrote that the big banks talk down stablecoins, then co-own one. Move $1 million from a Citi account into a stablecoin, and Citi loses $1 million of funding.
This week the OCC chose not to treat stablecoin rewards as illegal by default. A day later, SoFi started paying 4.40% on a bank token.
Here's what matters this week:
Let’s unpack.
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01 / REGULATION
The OCC leaves the rewards door open
What's going on here?
On Wednesday the OCC published its final rule for the stablecoin issuers it supervises, the first final GENIUS Act rule from a federal stablecoin regulator. Issuers still can't pay interest. But the OCC dropped a proposed presumption that rewards paid by affiliates and partners break that ban. It refused any safe harbor, even for older programs, and will judge each case. Issuers must redeem within two business days and hold at least $5 million in capital. The rule takes effect January 18.
What does this mean?
Our read: the exchanges won a procedural point. The OCC dropped a rule that would have assumed partner rewards were illegal, but it will still act on any program it sees as evasion. Coinbase pays 3.75% on USDC to Coinbase One members. Simon Taylor of Fintech Brainfood points out that the rule writes white-label distributors into its definitions. He sees a cut of the reserve income as the business opportunity.
The banks agree. The ABA said the rule will "preserve the status quo for crypto platforms." The BPI warned of "deposit flight." The weak spot is discretion: the next OCC can read the same rule more strictly. The Fed and FDIC rules are still unfinished.
Why should I care?
If deposits fund your bank, Washington just declined to shield them from a 3.75% reward. You'll have to compete for them on price.
The 51 Signal: who pays for a digital dollar
The law bars stablecoin issuers from paying you interest. Coinbase pays 3.75% on USDC to paying members. Since Thursday, a bank pays 4.40% on a token.
Annual rate on a dollar held, October 19 to 21, from SoFi, the New York Fed, Coinbase and the FDIC. Rates are variable and on different bases: SOFIE is an APY, SOFR an overnight rate. The issuer's 0% is the legal limit. Exhibit and analysis by 51 Insights.
Our read: SoFi pays deposit interest instead, and paying above SOFR means it is buying customers. The prize is idle money: SoFi cites Fed research estimating that about $64 billion, or 21.2% of all stablecoins, sits in rarely used wallets. Higher rates can pull those balances from rivals.
02 / BANKING · PRO ANALYSIS
SoFi pays you to stay a deposit
What's going on here?
SoFi launched SoFi Earn (SOFIE) on Thursday. SoFi calls it the first national-bank tokenized deposit for consumers. Each SOFIE is $1 on deposit at SoFi Bank, FDIC-insured up to the usual limits, earning a variable 4.40% APY. To buy crypto or send money onchain, customers swap it 1:1 for SoFiUSD, SoFi's stablecoin. It rolls out to SoFi Crypto members through November. SoFi has 15.8 million members.
What does this mean?
I think this is the cleanest answer to deposit flight yet. The money stays a deposit until the moment it moves, and only then becomes a stablecoin. Banks want every digital dollar back in a bank.
The catch is the price: SoFi pays above the overnight market rate to win balances. DRW's Don Wilson argues bank tokens will only move between a bank's approved clients, but will become the go-to cash for repo and stock loans. SoFi is betting consumers want one too. On Tuesday's Q3 call, listen for what SOFIE will cost.
Why should I care?
If you run a consumer bank, a rival now pays 4.40% on an insured digital dollar. That's the rate your savings account gets compared to.
Your Take
Who should be allowed to pay you for holding a digital dollar? |
03 / MARKET STRUCTURE
Goldman, Alphabet & Co. say no to their own tokens
What's going on here?
OKXICE, a 50/50 venture of OKX and NYSE owner ICE, plans to trade tokens of US stocks around the clock against stablecoins. Under the SEC's new exemption, a company can object, and that keeps a third-party token of its stock off the venue. By Monday, 16 companies had objected, including Goldman Sachs, Microsoft, Alphabet, McDonald's and Verizon. Its proposed list covers 63 tickers, and trading hasn't started.
What does this mean?
The company carries the risk and gets nothing. No money raised, no fees. The notice says prices come from an automated pool and may differ from the share price outside trading hours. Picture a fake rumor on a Saturday: the token falls, the stock never trades, and Monday's headline says your stock crashed. Daily volume is capped at 0.25% of normal trading for the biggest stocks and 2.5% for the rest, so pools may be thin.
I think companies will say yes to a different model: tokens issued inside the existing custody system. DTCC's service tokenizes securities it already holds, under the same identifier. The fight is over who controls the token.
Why should I care?
If you run investor relations, set a tokenization policy now. If you don't object, a stranger can tokenize your stock.
04 / CUSTODY
Banks take the keys
What's going on here?
Standard Chartered signed definitive agreements on Wednesday to buy all of Zodia Custody, which its venture arm helped start. Subject to approvals, Zodia's regulated custody will join the bank's securities services unit, and its software arm will spin into a new firm backed by Northern Trust, Emirates NBD and others. Deutsche Bank told Reuters it is weeks from launching bitcoin and ether custody in Germany, with stablecoin services, tokenized deposits and Asia to follow.
What does this mean?
Our read: custody is becoming a bank product. Whoever holds the coins keeps the client and the fees. Deutsche Bank wants to be the custodian and the ramp into stablecoins, in one bank, and ties it to its corporate bank's 8% yearly growth target through 2028.
Look at how StanChart split Zodia. It plans to keep the licensed vault and spin out the software for other banks to rent. That's the template: banks own the client, specialists sell the tools.
Why should I care?
If you sell custody to banks, your best customers are becoming your competitors. Sell them the software and let them own the vault.
Quick Hits
AI agents get into bank accounts. Big US banks are finding unauthorized AI agents inside customer accounts, some acting beyond user instructions, Axios' Madison Mills reports. Morgan Stanley, JPMorgan, Bank of America and Citi are restricting agent access.
JPMorgan ranks bitcoin, allocates zero. JPMorgan Asset Management's 2027 long-term forecasts introduce a bitcoin return range but leave it out of model portfolios.
Switzerland gets a bitcoin ETF. FINMA approved the country's first bitcoin ETF under fund law. Swiss investors used to buy issuer notes.
Sparkassen sell bitcoin in-app. Five German savings banks now offer bitcoin and other coins in their app, with DekaBank as custodian. More than 230 have shown interest.
Western Union plans USDPT payouts. Western Union picked Noah to deliver transfers as its USDPT stablecoin into a Western Union wallet.
Mastercard scores stablecoin risk. Mastercard launched Stablecoin Security, to flag fraud and sanctions risk before stablecoin payments settle.
Northern Trust sells to issuers. Northern Trust launched a money market fund for stablecoin reserves. Its CEO said demand is turning into mandates.
Community banks get deposit tokens. Jack Henry will plug Google Cloud's Universal Ledger into its core systems so smaller banks can offer tokenized deposits.
France votes a swap tax. The National Assembly voted 38 to 37 to tax crypto swaps into EU-regulated e-money tokens at 31.4% from 2027. The budget still needs final votes.
Money Moves
Visa ↔ Fireblocks, about $2.5B, reported. Axios reported late-stage talks, about 69% below Fireblocks' 2022 valuation. Fireblocks called it "not true at present time."
Robinhood Ventures → Erebor, $30M. Robinhood's listed venture fund bought preferred stock in the crypto-friendly national bank.
Mural, $15M Series A. Tether led the round for the ex-Palantir team's fiat and stablecoin payments platform, which has raised $28M in total, per Fortune.
Boardroom Reads
Rise of crypto vaults channels billions of dollars into risky lending. Nikou Asgari, FT. Over $10bn sits in curator-run lending vaults. Are curators fund managers?
Four-Minute Transfers Upend How Money Moves Around the World. Katherine Schwartz and Maria Clara Cobo, Bloomberg. Western Union and MoneyGram issue stablecoins to keep customers. Too late?
Competing rails for cross-border payments. Wenxin Du, Catherine Huang and David Scharfstein, BIS. Big banks' retail FX markups reach 200 to 400bp. Stablecoins are "not a panacea."
On the Calendar
Last week of October: Samsung Wallet adds USDC for eligible US Galaxy users.
October 28: FOMC decision. Its rate decision moves reserve income and deposit pricing.
October 29: Coinbase and Mastercard report. Listen for USDC rewards.
November 4: Circle Q3 results. Watch what it pays distributors.
November 12: EBA supervision of USDC begins for Circle's EU issuer.
That's all for now, folks.
– Marc & Team
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