The Stablecoin Question That Matters Most: Who Is Allowed to Pay the Yield

By Sergey Kravtsov, Co-founder and CEO of Papaya Finance, a fintech building stablecoin payment infrastructure

Both Washington and Brussels have barred stablecoin issuers from paying interest. Yet in the US a major exchange still pays a mid-single-digit rewards rate on the same token — recently advertised at about 4 percent — to subscribers who pay a monthly fee for the privilege. Who the rules still allow to pay yield, it turns out, is quietly deciding who owns the digital-dollar customer — and which banks and fintechs are left holding the rail instead of the relationship.

The two largest stablecoin regimes in the world disagree on plenty, but they reached the same core decision about interest. Under the GENIUS Act in the United States, a payment stablecoin issuer may not pay yield to the people holding its tokens. Under MiCA in Europe, issuers of e-money and asset-referenced tokens are barred from granting interest as well. The stated reason is the same on both sides of the Atlantic: keep stablecoins working as payment, and stop them becoming savings accounts that pull deposits from banks and money-market funds.

The reasoning is sound. The conclusion usually drawn from it — that stablecoins therefore cannot pay a return — is where the two regimes quietly diverge, and where the more useful story sits. I build payment infrastructure rather than policy, and the distinction is not academic: where a balance is allowed to earn is where it sits, and where it sits decides whose customer it is.

Start with the United States. The prohibition binds the issuer; it does not, by itself, bar a rewards program run by a separate platform. So the yield did not disappear — it moved one step down the chain, and picked up a gate on the way. Coinbase still offers USDC holders a rewards rate — recently advertised at about 4 percent for Coinbase One members. But since December 2025 the payout reaches only subscribers to Coinbase One, its paid tier at $4.99 a month; an ordinary US holder on Coinbase who does not subscribe now earns nothing. Circle passes Coinbase a large share of the interest it earns on the Treasuries backing USDC —  about $1.4 billion in Coinbase-related distribution costs in 2025.

Put plainly: the return a saver cannot receive from the issuer, they can receive from the exchange that holds their balance — and, in the US, increasingly only if they pay the exchange for access. The rule did not remove yield from the market; it moved the question of who may pay it — and the distributor answered by charging for the privilege.

That distinction is the whole game. Yield is what turns a payment token into a balance people leave in place, and whoever is allowed to pay it holds the relationship: the deposit-like balance, the recurring reason to open the app.

Europe drew the line differently, and the contrast is instructive. MiCA’s prohibition reaches past the issuer to service providers and to any benefit tied to holding the token, in its own words “directly from the issuer or from third parties.” That language is aimed squarely at the workaround the US left open. In practice, platforms switched off stablecoin rewards for EU users once the rules bound.

US law leaves more room for rewards outside the issuer than MiCA does, and that room is where the distributor built its position. Europe suppresses the same rewards more fully, keeping its regulated euro stablecoins closer to pure payment instruments — which may be one reason they have not taken hold as longer-term balances. The eight MiCA-compliant euro stablecoins tracked by Decta held a combined market value of about $674 million at the end of June 2026, against a global stablecoin market well north of $300 billion. And the question is not only a Western one. In markets where dollar balances are already held outside the local banking system — Central Asia among them — whoever is permitted to pay for holding a digital dollar will end up holding the deposit relationship local banks still assume is theirs.

None of this is fixed. The European Commission has opened a review of the framework, with the treatment of stablecoin interest among the questions in play — a sign the blanket prohibition carries costs of its own. In the US the route is already under pressure. The OCC’s proposed rules under the GENIUS Act would presume that an issuer breaches the ban where it has an arrangement with an affiliate or a related third party to pay yield — language written wide enough to reach the platform distributing its token. The FDIC’s April proposal follows the same line for the issuers it supervises. The distributor route lasts only as long as regulators keep treating a platform’s paid rewards as something other than an issuer paying yield — coherent in law, and now openly in play.

For any fintech building here, the valuable place to stand is not issuance.It is distribution: that is where the rules currently let the balance earn, and so where it gathers. And it is why a bank that treats stablecoins as a settlement rail while ignoring the balance forming on someone else’s app may find it has ceded the more valuable half of the business without noticing. The irony is hard to miss: the ban was meant to keep balances from draining bank deposits, yet through a distributor’s rewards program the balance drains all the same — into an account the bank does not hold.

The competition in stablecoins is usually described as a race over speed, chains, or licences. The more decisive contest is quieter and already under way — not whether a digital dollar can earn a return, but who the rules allow to pay it. That question is doing more to determine who ends up owning the customer than any settlement benchmark on the table.

About the Author

Sergey Kravtsov is the co-founder and CEO of Papaya Finance, a settlement layer for cross-border recurring payments. Papaya lets PSPs, exchanges, and banks embed programmable stablecoin rails without taking on custody, FX, or compliance. Its flagship corridor connects Southeast Asia and the US, starting with Vietnam.