Will Interest Payments on Stablecoins Be Blocked? Regulators Turn Up the Pressure [Crypto Briefing]

[The Financial News] As stablecoins, originally designed as payment instruments pegged to fiat currencies such as the U.S. dollar, evolve into yield-bearing assets, regulators at home and abroad are moving to impose bans on interest payments. The United States and the European Union (EU) have proposed rules that would block not only issuers but also platforms from distributing returns to users through indirect revenue-sharing schemes. In Korea, the scope of any ban on interest payments is expected to become a key point of contention in the second phase of legislation, including the General Act on Digital Assets.
According to an analysis by KB Securities, yield-bearing stablecoins saw their market share surge from around 1% in early 2024 to 4.5% (about 11 billion dollars) by mid-2025. Analysts say that as stablecoins move beyond use in crypto trading into corporate treasury management and real-world payments, the market for yield-bearing stablecoins that maintain a U.S. dollar peg while paying interest has been expanding rapidly.
Stablecoin issuers have been ramping up their reward programs in response. A prominent example is Circle, the issuer of USD Coin (USDC), which shares reserve income with the virtual asset exchange Coinbase, and Coinbase in turn distributes part of that income to users in the form of rewards.
Regulators, however, view these kinds of workarounds as a threat to financial stability. The Office of the Comptroller of the Currency (OCC), in a proposed rule to implement the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), has suggested introducing a “presumption of indirect interest payments.” The core idea is that if an issuer enters into a revenue-sharing agreement with an affiliate or other third party, and that third party pays returns to stablecoin holders, the issuer will be deemed to have violated the ban on interest payments.
The EU’s Markets in Crypto-Assets Regulation (MiCA) also explicitly prohibits issuers and crypto-asset service providers (CASPs) from paying interest on relevant tokens. It does not allow interest that is linked to the period for which the tokens are held.
Korea’s legislative process is moving in a similar direction. While the Financial Services Commission is drafting a new framework, some of the amendments to the General Act on Digital Assets proposed by ruling and opposition lawmakers would also ban interest payments. These drafts set both issuers and service providers (such as exchanges) as entities subject to the ban and adopt a broad prohibition on “any payment of economic value.” Some bills, however, only prohibit “direct payments,” raising the prospect that whether platform marketing rewards will be allowed could become a key variable in future policy debates.
Banks fear that if interest payments on stablecoins are permitted, their own credit-creation function could be weakened. At the same time, they are accelerating development of tokenized deposits. Because tokenized deposits can pay interest under existing law and are covered by deposit insurance, banks see them as potentially having a competitive edge over stablecoins if the latter are ultimately barred from paying interest.
“Stablecoins are at a crossroads as they move into the regulated financial system: they could remain as payment instruments or transform into yield products,” a securities industry official said. “Depending on how the rules are set, we are likely to see an intensified battle for dominance over payment infrastructure between virtual asset exchanges and traditional banks,” the official predicted.
Meanwhile, attention is focusing on the possibility of cooperation on a Korean won stablecoin as Jeremy Allaire, founder and Chief Executive Officer (CEO) of Circle, is scheduled to meet with Korean financial institutions and virtual asset exchanges on the 13th. With the second phase of legislation still underway and the domestic legal framework incomplete, more concrete discussions are expected on the use of USDC in Korea and on potential Korean won stablecoin services.

elikim@fnnews.com Kim Mi-hee Reporter