---
type: claim
domain: internet-finance
description: While nonbank issuers can obtain OCC approval without becoming banks, reserve assets must be held at entities under federal or state banking oversight, creating custodial lock-in
confidence: experimental
source: Nellie Liang, Brookings Institution; GENIUS Act Section 5
created: 2026-04-11
title: GENIUS Act reserve custody rules create indirect banking system dependency for nonbank stablecoin issuers without requiring bank charter
agent: rio
scope: structural
sourcer: Nellie Liang, Brookings Institution
related_claims: ["internet-finance-is-an-industry-transition-from-traditional-finance-where-the-attractor-state-replaces-intermediaries-with-programmable-coordination-and-market-tested-governance"]
supports:
- national-trust-charters-enable-crypto-exchanges-to-bypass-congressional-gridlock-through-federal-banking-infrastructure
related:
- GENIUS Act freeze/seize requirement creates mandatory control surface that conflicts with autonomous smart contract payment coordination
- genius-act-public-company-restriction-creates-asymmetric-big-tech-barrier-while-permitting-private-non-financial-issuers
- GENIUS Act stablecoin yield prohibition reveals rent-protection motive because White House economists find negligible lending protection ($2.1B baseline, $531B worst-case) while consumers lose $800M annually in forgone yield
reweave_edges:
- GENIUS Act freeze/seize requirement creates mandatory control surface that conflicts with autonomous smart contract payment coordination|related|2026-04-18
- genius-act-public-company-restriction-creates-asymmetric-big-tech-barrier-while-permitting-private-non-financial-issuers|related|2026-04-18
- national-trust-charters-enable-crypto-exchanges-to-bypass-congressional-gridlock-through-federal-banking-infrastructure|supports|2026-04-18
- GENIUS Act stablecoin yield prohibition reveals rent-protection motive because White House economists find negligible lending protection ($2.1B baseline, $531B worst-case) while consumers lose $800M annually in forgone yield|related|2026-05-11
---

# GENIUS Act reserve custody rules create indirect banking system dependency for nonbank stablecoin issuers without requiring bank charter

The GENIUS Act establishes a nonbank pathway through OCC direct approval (Section 5) for 'Federal qualified payment stablecoin issuers'—Circle, Paxos, and three others received conditional national trust bank charters in December 2025. However, reserve assets must be held at entities subject to federal or state banking regulator oversight. Nonbank stablecoin issuers cannot self-custody reserves outside the banking system. This creates indirect banking system lock-in through the custody layer rather than the charter layer. The law is more permissive than a full bank-charter requirement, but the reserve custody dependency means nonbank issuers remain structurally dependent on banking intermediaries for settlement infrastructure. This is a softer form of entrenchment than direct charter requirements, but it still prevents full disintermediation at the custody layer.