I. Executive Summary
The Digital Sovereignty Alliance (DSA) appreciates the opportunity to provide comments on the Office of the Comptroller of the Currency’s Advance Notice of Proposed Rulemaking (91 FR 10202) regarding the implementation of a federal framework for payment stablecoins.
DSA strongly supports the development of a comprehensive, federally supervised regime for payment stablecoins that advances financial stability, protects consumers, and reinforces the global role of the U.S. dollar in an increasingly digital financial system. The OCC’s effort represents a critical step toward establishing regulatory clarity in a market that has, to date, operated under a fragmented combination of state and federal guidance.
At a high level, DSA supports a framework grounded in three core principles:
- Reserve integrity and transparency, ensuring that payment stablecoins remain fully backed by high-quality liquid assets and are not exposed to credit, liquidity, or leverage risks;
- Reliable and accessible redemption at par, supported by operationally feasible standards that reflect real-world payment infrastructure while preserving consumer protection; and
- Clear supervisory pathways, including for foreign issuers, that promote participation within the U.S. regulatory perimeter rather than regulatory fragmentation across jurisdictions.
Within this framework, DSA offers targeted recommendations in three key areas.
First, with respect to reserve assets and rehypothecation (Questions 40–44), DSA supports strict limitations on risk-generating activities while recommending a functional approach that distinguishes impermissible reuse of reserves from protective structures that enhance segregation and bankruptcy remoteness. We also support a principles-based approach to liquidity management and clear, standardized disclosures.
Second, regarding redemption processes (Questions 100–110), DSA emphasizes that redemption at par is the central consumer protection mechanism underpinning payment stablecoins. At the same time, regulatory requirements should reflect operational realities, including the role of intermediaries, settlement timing, and liquidity dynamics. We recommend a commercially reasonable standard for timeliness, explicit recognition of tiered access models, and a structured framework for managing redemption during periods of market stress.
Third, with respect to international standards, capital treatment, and foreign issuers (Questions 187–191), DSA recommends an outcomes-based approach to international alignment and risk-based calibration of capital requirements. A clear and workable pathway for foreign issuers is essential to ensuring that globally significant dollar-backed stablecoin activity is brought within the U.S. supervisory perimeter.
Across all areas, DSA emphasizes the importance of a forward-looking implementation approach. Given the absence of a unified federal framework to date, issuers have developed under differing regulatory environments. The final rule should therefore prioritize bringing existing activity into compliance through defined transition pathways, rather than relying on retrospective evaluation of prior lawful conduct. This approach will promote regulatory certainty, minimize market disruption, and accelerate adoption of federal standards.
A well-calibrated framework will not only strengthen consumer protection and financial stability, but also ensure that the next generation of dollar-based payment infrastructure is developed, supervised, and scaled within the United States.
DSA appreciates the OCC’s leadership on this issue and welcomes continued engagement as the rulemaking process evolves.
II. Reserve Assets, Rehypothecation, and Disclosures (Questions 40–44)
A. Rehypothecation and Reserve Integrity (Q40)
The OCC appropriately recognizes that strict limitations on the use of reserve assets are fundamental to maintaining the safety, soundness, and credibility of payment stablecoins. DSA strongly supports the statutory objective of preventing the use of reserve assets in a manner that introduces credit, liquidity, or leverage risk, as such activities would undermine confidence in the redeemability and stability of the instrument.
However, additional clarity is warranted to ensure that the prohibition on rehypothecation is implemented in a manner that is both effective and operationally workable. In particular, the rule should clearly distinguish between (i) impermissible uses of reserve assets, such as proprietary trading, leverage, or maturity transformation, and (ii) permissible structures that enhance consumer protection without introducing incremental risk.
Certain legal arrangements, such as collateral trustee structures or custodial segregation frameworks, may involve the technical “pledging” of assets while preserving full reserve backing, bankruptcy remoteness, and the exclusive benefit of stablecoin holders. Absent explicit clarification, such arrangements could be inadvertently restricted despite improving consumer protection outcomes.
The OCC has already acknowledged that limited use of repurchase agreements may be appropriate where used to generate liquidity for redemption purposes, reinforcing that the objective of the rule is not to prohibit all forms of asset use, but rather to prevent risk-enhancing activities.
Accordingly, DSA recommends that the final rule adopt a functional approach, prohibiting only those activities that introduce measurable risk to reserve integrity while permitting structures that preserve or enhance holder protections.
Proposed Regulatory Text
“A permitted payment stablecoin issuer or its custodian shall not pledge, rehypothecate, or otherwise reuse reserve assets in a manner that introduces credit, liquidity, or market risk to such assets.
Notwithstanding the foregoing, arrangements that maintain full reserve backing, segregation, and bankruptcy remoteness for the benefit of stablecoin holders shall not be deemed prohibited, provided such arrangements do not involve leverage, proprietary trading, or maturity transformation.”
B. Liquidity Management and Repurchase Agreements (Q41)
The OCC’s recognition that issuers must maintain access to liquidity to meet redemption demands is well-founded. Stablecoin systems, particularly at scale, require flexible and reliable liquidity mechanisms to ensure timely redemption under both normal and stressed conditions.
DSA supports the inclusion of repurchase agreements as a permissible liquidity management tool, particularly where backed by short-duration U.S. Treasuries. As the OCC notes, restricting access to such tools could impair an issuer’s ability to meet redemption demands efficiently and in real time.
However, the final rule should avoid overly prescriptive limitations that could constrain prudent liquidity management. Instead, the OCC should adopt a principles-based standard that defines acceptable characteristics such as duration, collateral quality, and purpose, without requiring transaction-level approvals.
This approach ensures that issuers can respond dynamically to redemption demand while maintaining alignment with safety and soundness objectives.
Proposed Regulatory Text
“Permitted payment stablecoin issuers may utilize repurchase agreements and similar transactions for the purpose of managing liquidity to meet redemption obligations, provided that such transactions:
(i) are fully collateralized by high-quality liquid assets;
(ii) are of short duration; and
(iii) do not involve maturity transformation or introduce material credit or market risk.”
C. Disclosures (Q42)
Clear and consistent disclosures are essential to ensuring that stablecoin holders understand the nature of the instrument and do not conflate it with traditional bank deposits or government-backed liabilities.
DSA supports the OCC’s proposed disclosure framework and recommends that it be implemented in a manner that is both standardized and adaptable to digital delivery environments. Stablecoin usage often occurs through digital interfaces, and disclosure requirements must accommodate these channels without diminishing clarity or effectiveness.
At a minimum, disclosures should clearly communicate that stablecoins are not legal tender, are not issued or guaranteed by the U.S. government, and are not insured by the FDIC. These disclosures should be presented prominently at key interaction points, including issuance, redemption, and platform onboarding.
Proposed Regulatory Text
“A permitted payment stablecoin issuer shall provide clear and conspicuous disclosures to holders stating that:
(i) the stablecoin is not legal tender;
(ii) the stablecoin is not issued or guaranteed by the United States government; and
(iii) the stablecoin is not insured by the Federal Deposit Insurance Corporation.
Such disclosures may be delivered through digital interfaces, provided they are readily accessible and understandable to users.”
D. Marketing and Consumer Clarity (Q43)
The prevention of misleading representations is a critical component of consumer protection. DSA supports the OCC’s focus on ensuring that marketing practices do not create confusion regarding the nature or backing of payment stablecoins.
In particular, the rule should prohibit representations that imply government endorsement, insurance, or equivalence to bank deposits. These protections are especially important given the rapid adoption of stablecoins across both retail and institutional markets.
At the same time, the OCC should ensure that restrictions are clearly defined and objective, avoiding overly broad standards that could create uncertainty for compliant issuers.
Proposed Regulatory Text
“A permitted payment stablecoin issuer shall not represent, directly or indirectly, that a payment stablecoin is legal tender, insured by the Federal Deposit Insurance Corporation, or guaranteed by the United States government.
The use of official government insignia or similar representations that could reasonably imply such backing shall be prohibited.”
E. Eligible Reserve Assets (Q44)
The integrity of reserve assets is central to the stability of payment stablecoins. DSA supports limiting eligible reserves to high-quality liquid assets that can be readily converted to cash without material loss of value.
However, the OCC should clarify that eligibility is determined based on the underlying characteristics of the asset, rather than its legal form. For example, government money market funds that invest exclusively in U.S. Treasuries should be treated as functionally equivalent to direct Treasury holdings.
This approach ensures both safety and operational flexibility, enabling issuers to manage reserves efficiently while maintaining full backing.
Proposed Regulatory Text
“Eligible reserve assets shall consist of high-quality liquid assets, including United States Treasury securities and cash equivalents.
Investment vehicles that invest exclusively in such assets shall be deemed eligible, provided that the underlying assets meet the requirements of this section.”
III. Redemption Processes (Questions 100–110)
A. Scope of Redemption Rights (Q100)
The OCC seeks to define the scope of redemption rights associated with payment stablecoins, including whether holders must be able to redeem at par and how broadly such rights should extend.
DSA strongly supports the principle that payment stablecoins must be redeemable at par in fiat currency. This feature is fundamental to their role as a reliable payment instrument and is central to maintaining user confidence and price stability.
However, the regulatory framework should focus on ensuring that redemption is effectively achievable in practice, rather than prescribing a rigid structure for how such rights must be delivered. In particular, the rule should avoid requiring that all holders maintain a direct relationship with the issuer, as this would not reflect how stablecoin markets function and could introduce unnecessary operational burdens.
Instead, the appropriate standard is whether holders have a practical and reliable ability to redeem at par, regardless of whether such access is provided directly or through intermediaries.
Proposed Regulatory Text
“A permitted payment stablecoin issuer shall ensure that holders have a practical and reliable ability to redeem stablecoins at par value in fiat currency.”
B. Legal Nature of Redemption Claims (Q101)
The OCC requests input on how redemption rights should be legally characterized.
DSA recommends that the OCC adopt a functional and enforceability-based approach, rather than mandating a specific legal structure. Redemption rights may arise through direct contractual claims, custodial arrangements, or intermediary relationships. The key requirement is that such rights are clearly defined, legally enforceable, and transparent to holders.
Mandating a single legal form could limit innovation and exclude otherwise robust models that provide equivalent or superior consumer protection outcomes.
Proposed Regulatory Text
“Redemption rights shall be clearly defined, legally enforceable, and transparent to holders, and may be structured through direct or intermediated arrangements.”
C. Direct vs. Indirect Redemption Access (Q102)
The OCC seeks comment on whether redemption must be offered directly to all holders.
DSA recommends that the OCC explicitly permit intermediated redemption models, recognizing that these are a standard feature of financial markets. Exchanges, custodians, and other intermediaries play a critical role in facilitating access to liquidity and redemption at scale.
Requiring universal direct access could reduce efficiency, fragment liquidity, and create unnecessary operational burdens without improving consumer outcomes.
Proposed Regulatory Text
“A permitted payment stablecoin issuer may satisfy redemption obligations through direct or intermediated channels, provided that such arrangements do not impair a holder’s ability to redeem at par value.”
D. Definition of Timely Redemption (Q103)
The OCC seeks input on how “timely redemption” should be defined.
DSA recommends that the OCC define timeliness using a commercially reasonable standard, rather than requiring instantaneous redemption. Financial infrastructure, including payment systems and banking rails, operates on defined settlement cycles that must be reflected in regulatory expectations.
A rigid standard could introduce systemic risk by forcing issuers to maintain excessive liquidity buffers or engage in rapid asset liquidation during periods of high demand.
Proposed Regulatory Text
“Timely redemption shall mean redemption within a commercially reasonable timeframe under normal market conditions, including same-day or next-business-day settlement.”
E. Redemption Timing Expectations (Q104)
The OCC seeks further clarification on expected redemption timing.
DSA recommends that the OCC distinguish between normal and extraordinary conditions when evaluating redemption timing. Under normal conditions, prompt redemption should be expected. However, during periods of market stress or operational disruption, limited flexibility may be necessary.
Incorporating this distinction helps prevent procyclical dynamics that could undermine financial stability.
Proposed Regulatory Text
“Redemption timing expectations shall be assessed based on prevailing market conditions, with prompt redemption required under normal conditions and reasonable flexibility permitted under extraordinary conditions.”
F. Operational Constraints on Redemption (Q105)
The OCC requests input on how operational constraints should be considered.
DSA emphasizes that redemption requirements must reflect the real-world constraints of payment and settlement systems, including banking hours, payment rail availability, and cross-border limitations. Ignoring these constraints could result in requirements that are not technically feasible or that impose unnecessary inefficiencies.
A principles-based approach allows issuers to meet regulatory objectives while adapting to evolving infrastructure.
Proposed Regulatory Text
“Redemption requirements shall be implemented in a manner that reflects the operational realities of payment and settlement systems, while ensuring reliable access to redemption at par value.”
G. Permissibility of Redemption Fees (Q106)
The OCC seeks comment on whether redemption fees should be permitted.
DSA believes that reasonable redemption fees are consistent with efficient market functioning and do not inherently conflict with the principle of par redemption. Fees may serve legitimate purposes, including cost recovery and liquidity management.
However, fees must not be structured in a manner that effectively discourages redemption or creates barriers to exit.
Proposed Regulatory Text
“A permitted payment stablecoin issuer may impose reasonable redemption fees, provided that such fees are transparent, consistently applied, and do not materially impair redemption at par value.”
H. Minimum Redemption Thresholds (Q107)
The OCC requests input on minimum redemption thresholds.
DSA recommends that minimum thresholds be permitted where operationally justified, particularly in institutional contexts. However, thresholds should not be set at levels that restrict meaningful access for typical users.
Transparency and proportionality are essential to ensuring that thresholds do not undermine consumer protection objectives.
Proposed Regulatory Text
“Minimum redemption thresholds may be applied where operationally justified, provided that such thresholds are transparent and do not materially restrict access to redemption.”
I. Redemption Under Stress Conditions (Q108)
The OCC seeks comment on how redemption should function during periods of market stress.
DSA recommends that the OCC explicitly recognize that extraordinary market conditions may require temporary adjustments to redemption timing. Without such flexibility, issuers may be forced into disorderly asset liquidation, potentially amplifying instability in underlying markets.
At the same time, redemption at par should remain the ultimate obligation of the issuer.
Proposed Regulatory Text
“In extraordinary market conditions that materially impair liquidity or market functioning, a permitted payment stablecoin issuer may implement temporary measures affecting redemption timing, subject to disclosure and supervisory oversight.”
J. Suspension or Limitation of Redemption (Q109)
The OCC requests input on whether redemption may be suspended or limited.
DSA recommends that any suspension or limitation of redemption be treated as an extraordinary and temporary measure, subject to strict conditions. Clear guardrails are necessary to prevent misuse while preserving flexibility in extreme scenarios.
Such measures should be accompanied by transparency, regulatory engagement, and a defined plan for resumption.
Proposed Regulatory Text
“Temporary limitations on redemption may be implemented only under extraordinary conditions and shall require disclosure, supervisory engagement, and a defined plan for resumption of normal operations.”
K. Disclosure and Operational Requirements (Q110)
The OCC seeks input on disclosure and operational requirements associated with redemption.
DSA supports requiring clear, accessible, and consistent disclosures regarding redemption processes, including timelines, fees, thresholds, and access channels. These disclosures are essential to ensuring informed user participation and maintaining confidence in the reliability of payment stablecoins.
Operational requirements should remain principles-based, focusing on outcomes such as continuity, accuracy, and scalability, rather than prescribing specific technical implementations. This approach allows issuers to adapt to evolving technologies while maintaining robust and resilient redemption processes.
In addition, the OCC should clarify how redemption-related requirements will be applied to existing stablecoin issuers transitioning into the federal framework. Given the absence of a unified federal regime to date, issuers have operated under differing regulatory interpretations. The final rule should therefore adopt a forward-looking approach to compliance, under which issuers are provided a reasonable transition period to align with new requirements, and prior lawful activity is not, in isolation, treated as a basis for enforcement. This approach will promote regulatory certainty, facilitate migration into the federal supervisory perimeter, and support continuity of market functioning.
Proposed Regulatory Text
“A permitted payment stablecoin issuer shall maintain operational systems and disclosures sufficient to ensure that holders understand and can reliably access redemption at par, including information regarding timelines, fees, thresholds, and access mechanisms.”
IV. International Standards, Capital, and Foreign Issuers (Questions 187–191)
A. International Alignment and Functional Equivalence (Q187)
The OCC appropriately recognizes the importance of international coordination in the regulation of payment stablecoins, given their inherently cross-border nature. However, achieving effective alignment requires a focus on outcomes rather than formal harmonization.
As noted in prior commentary, foreign regulatory regimes may differ in structure and approach, particularly where they were developed prior to the enactment of U.S. legislation. Requiring strict equivalence in form could unnecessarily limit the ability of foreign issuers to participate in the U.S. market, while providing limited additional protection.
DSA recommends that the OCC adopt a functional equivalence standard, under which foreign regimes are evaluated based on whether they achieve comparable outcomes in areas such as solvency, liquidity, and redemption assurance.
This approach promotes international interoperability while preserving U.S. regulatory objectives.
Proposed Regulatory Text
“In evaluating foreign regulatory regimes, the OCC shall apply a functional equivalence standard, focusing on whether such regimes achieve comparable outcomes with respect to solvency, liquidity, reserve integrity, and redemption assurance.”
B. Capital Requirements and Risk Calibration (Q188)
The imposition of capital requirements beyond full reserve backing should be carefully calibrated to reflect actual risk exposure. Payment stablecoins differ fundamentally from traditional banking liabilities in that they are designed to be fully reserved and not subject to maturity transformation.
Accordingly, additional capital requirements should not be imposed in a manner that assumes risks that are not present in the underlying business model.
Instead, capital requirements should be tied to clearly defined and measurable risk factors, such as:
- Operational risk
- Redemption volatility
- Reserve asset composition
This approach ensures that capital requirements are proportionate and do not unnecessarily constrain innovation or market participation.
Proposed Regulatory Text
“Additional capital requirements for permitted payment stablecoin issuers shall be based on identifiable and measurable risk factors, including operational risk, redemption volatility, and reserve asset characteristics.”
C. National Trust Banks and Competitive Neutrality (Q189)
The OCC should ensure that its framework maintains competitive neutrality across different issuer structures, including national trust banks and other permissible entities.
Applying traditional bank capital standards to fully reserved stablecoin activities may result in duplicative or excessive requirements that do not correspond to the underlying risk profile.
DSA recommends that the OCC allow for alternative capital frameworks where appropriate, particularly where issuers maintain fully segregated reserves and do not engage in lending or maturity transformation.
Proposed Regulatory Text
“Capital requirements applicable to national trust banks engaged in payment stablecoin activities shall be calibrated to reflect the specific risk profile of such activities, including the absence of maturity transformation and the presence of fully segregated reserves.”
D. Federal Branches of Foreign Banks (Q190)
The application of capital equivalency requirements to federal branches of foreign banks should similarly reflect the unique characteristics of stablecoin liabilities.
Treating fully reserved stablecoin liabilities as equivalent to traditional deposits may overstate risk and lead to inefficient capital allocation.
DSA recommends that the OCC adopt a differentiated approach that recognizes the reduced risk profile of fully reserved instruments.
Proposed Regulatory Text
“In applying capital equivalency requirements to federal branches of foreign banks, the OCC shall account for the fully reserved nature of payment stablecoin liabilities and may apply differentiated treatment reflecting their reduced risk profile.”
E. Foreign Issuers and Transition Pathways (Q191)
A critical objective of the OCC’s framework should be to bring globally significant stablecoin issuers within the U.S. regulatory perimeter. Achieving this objective requires a clear, predictable, and workable pathway for foreign issuers.
If the regulatory framework is perceived as overly rigid or retroactive, foreign issuers may choose to operate outside the U.S. market, limiting the effectiveness of oversight and reducing the global influence of U.S. regulatory standards.
DSA therefore recommends that the OCC establish a structured onboarding and transition framework, including:
- Defined registration pathways
- Clear supervisory expectations
- Reasonable timelines for compliance
Importantly, the OCC should adopt a forward-looking approach to compliance, recognizing prior lawful activity and avoiding retroactive enforcement.
Proposed Regulatory Text
“Foreign payment stablecoin issuers may continue operations within the United States during a defined transition period while seeking authorization under this framework.
Compliance shall be assessed on a forward-looking basis, and prior lawful activity shall not, in and of itself, constitute a basis for enforcement where the issuer acts in good faith to comply with final requirements.”