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- Stablecoin rewards face FDIC scrutiny as Paradigm challenges proposed rule language.
- Paradigm says the GENIUS Act limits issuer yield, not third-party reward programs.
- FDIC proposal draws wider crypto pushback over white-label models and reporting rules.
Paradigm has urged the U.S. Federal Deposit Insurance Corporation to revise its proposed stablecoin framework. The crypto investment firm said the draft could restrict third-party companies that offer Stablecoin rewards. It argued the proposal goes beyond the GENIUS Act.
The firm made the request in a comment letter submitted to the FDIC. Paradigm said the GENIUS Act bars stablecoin issuers from paying yield directly to holders. It said the law does not ban independent reward programs from outside companies.
Paradigm argued that the FDIC’s approach could expand the statute without congressional approval. The firm said regulators should not presume that related third parties fall under the yield ban. It warned that such language could affect exchanges, fintech platforms, and distribution partners.
Paradigm Urges FDIC to Narrow Stablecoin Rewards Rule
The company asked the FDIC to remove the disputed provisions from the proposal. It also said the agency could align its approach with proposals from the OCC and NCUA. Paradigm said that path would keep the rule closer to the law approved by Congress.
Stablecoin rewards are at the center of the dispute between regulators and the crypto industry. Many platforms use activity-based incentives for payments, transfers, and customer engagement. Paradigm said those programs are different from yield paid directly by issuers.
The firm also cited the legislative history of the GENIUS Act. It said lawmakers had considered wider limits on Stablecoin rewards but did not include them in the final law. Paradigm argued that Congress chose to restrict issuers, not outside service providers.
The issue comes as lawmakers continue work on the CLARITY Act. That separate crypto market structure bill preserves activity-based Stablecoin rewards offered by third-party companies. Ripple, Coinbase, and other digital asset firms have urged Congress to move the bill forward.
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Consensys raised similar concerns in earlier comments on the FDIC proposal. The blockchain software company said the draft could affect ordinary commercial arrangements. It pointed to distribution partnerships, brand licensing deals, and other structures used across the stablecoin market.
FDIC Stablecoin Plan Faces Operational Pushback
Beyond Stablecoin rewards, Paradigm challenged several operational parts of the FDIC plan. The firm urged regulators to protect white-label stablecoin arrangements. It said separate reserves, accounts, and compliance systems for each branded token would create unnecessary costs.
Paradigm recommended subledgering practices similar to those proposed by the OCC. It said this structure could support branded stablecoins without duplicate infrastructure. The firm also asked the FDIC to recognize tokenized reserve assets in the final framework.
Reporting rules also drew criticism from Paradigm. The firm said weekly supervisory reports would impose high fixed costs on issuers. It recommended monthly reporting and clearer categories written directly into the rule text.
Paradigm also asked the agency to create an enforcement cure period. The firm said compliant issuers should be able to correct unintended violations before penalties apply. It argued that this process would support oversight without punishing technical mistakes.
The debate shows that Stablecoin rewards remain a sensitive policy issue in Washington. Regulators are seeking stronger controls for payment stablecoins. Crypto firms want rules that follow the statute and avoid broader restrictions.
Paradigm’s filing adds to wider industry pushback against the FDIC proposal. The firm said the agency should avoid reshaping stablecoin business models beyond congressional intent. It argued that clearer treatment of Stablecoin rewards would help issuers, platforms, and users follow the law.
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