The crypto industry’s stablecoin operations, such as the arrangement between issuer Circle and leading exchange Coinbase, could be under serious pressure in the U.S. Office of the Comptroller of the Currency’s newly proposed set of stablecoin rules.

Even as OCC chief Jonathan Gould testified in the U.S. Senate on issues that included crypto oversight on Thursday, people in the industry said they’ve been trying to understand his agency’s 376-page proposal to regulate domestic issuers under the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act that became law last year. The allowance of stablecoin yield and reward has not only been central to the GENIUS Act, but it’s also been a chief negotiation point in the more important follow-up legislation known as the Digital Asset Market Clarity Act.

Close financial ties between issuers and crypto platforms that handle their tokens “would make it highly likely that the issuer’s payments of yield or interest would be made to the holder through an intermediary or an attempt the evade the GENIUS Act’s prohibition on interest and yield payments,” the OCC proposal suggested.

The firms can rebut that presumption, the OCC said, “given the issuer provides sufficient evidence to the contrary.”

On the controversial point of rewards, the industry has worked under an assumption that the GENIUS Act’s ban on yield or rewards offered by stablecoin issuers doesn’t extend to third parties that can offer their own rewards programs on those issuers’ tokens, such as at Coinbase. But the OCC’s proposed language assumes that the law’s prohibition would be improperly evaded under certain third-party relationships, though the details are still being studied by crypto lobbyists and lawyers.

Industry insiders who requested anonymity acknowledged this opening effort looks bad, and they’ll line up to try to get it changed, but some suggest the agency’s wording may leave enough room that continued rewards could be manageable.

Todd Phillips, a former lawyer at the Federal Deposit Insurance Corp. and business professor in Georgia who tracks digital assets policy, agreed the proposed language doesn’t seem like a hard no.

“I think there’s some play in the joints of what the OCC has proposed,” Phillips told CoinDesk on Thursday. He said the opening language seems uncertain on whether it means to “shut down all permutations of stablecoin rewards.”

“The OCC has clearly gone beyond what the statute requires,” Phillips said, adding that the extent of the restriction “is open to debate.”

The agency didn’t immediately respond to questions from CoinDesk.

The crypto industry’s primary policy aim in Washington is to advance the Clarity Act’s regulations for the overall U.S. digital asset markets. In that legislative negotiation, this issue of stablecoin yield has become one of the leading points of contention, with U.S. bankers arguing that such yield threatens their foundational dependence on customer deposits. During those talks, the crypto side has repeatedly argued that the GENIUS Act, as it stands, allows third party crypto firms to offer rewards on stablecoin holdings and activities.

One of the insiders in the negotiation told CoinDesk on Thursday that the OCC’s action should undermine the banks’ lobbying, because what’s the point of hashing out stablecoin yield in further legislation when the banking regulator has already taken it up as a proposed rule? Despite that, they also said the OCC overreached, and the industry will likely fight the proposed rulemaking even as the Clarity Act continues its way through Congress.

Meanwhile, the proposals advanced by Gould — a former chief legal officer at Bitfury who has otherwise been strongly supportive of the crypto industry — casts some doubt on industry confidence that GENIUS will protect stablecoin rewards programs, which represents a significant business at Coinbase. The U.S. crypto exchange hasn’t yet made any public statements, and a company spokesperson declined to comment.

The proposed rulemaking from the OCC, which charters and oversees national banks and trusts in the U.S., is preliminary, opening the ideas to a public comment period that would later have to be followed up with a final rulemaking process. With controversial rules, this process usually requires months of discussion and review.

If the OCC does cut off the ability of crypto platforms to extend stablecoin yield to customers, it may eliminate one of the Clarity Act sticking points, though other matters are also still standing in the way of the bill. Democratic lawmakers have insisted — for instance — that the legislation address potential conflicts of interest posed by senior government officials, such as President Donald Trump, personally profiting from the crypto industry.

At a Thursday hearing before the Senate Banking Committee, stablecoin rewards came up often as a business that scares the banking industry. Regulators suggested they haven’t yet seen a flight of deposits from banks.

“We have to take these concerns, the concerns of community banks, especially seriously,” said Senator Angela Alsobrooks, a Democrat who sought to negotiate a compromise in the Clarity Act to ban the crypto industry from rewards on stablecoin holdings in a way that resembles a deposit account. So far, negotiations among the political parties, the banks, the crypto industry and the White House haven’t yet advanced to a compromise that can get to a vote in the Senate.

Read More: OCC pitches stablecoin rules as U.S. Senate holds banking hearing in which crypto stars

The slowdown in on-chain activity echoes a similar lull last summer that came right before a huge rebound in Bitcoin.

The total fees paid on the Binance Smart Chain (BSC) recently fell to approximately $593,000, marking the network’s lowest usage cost since at least August 2025.

This collapse in transaction activity on one of crypto’s busiest highways is reviving memories of a similar demand drought last summer that immediately preceded a 95% rally in Bitcoin (BTC).

A Silent Market Flashes a Historic Signal

Blockchain fees are the clearest measure of user demand, representing what people pay to move tokens or use decentralized applications. When fees drop sharply, it signals reduced network congestion and waning speculative interest.

According to data from analyst Amr Taha, on February 23, BSC fees sank to $593,000, which is well below the $1.07 million trough recorded on August 7, 2025. At that time, Bitcoin was trading near $55,000, and, per Taha, the fee drop later helped form a major bottom before the asset embarked on a rally that saw its price shoot up by more than 95%.

The on-chain observer also flagged a steep drop in Bitcoin’s short-term holder realized market cap, which fell to about $386 billion on February 24, well below an earlier low of $440 billion recorded on April 8, 2025.

Historically, similar contractions have coincided with heavy capitulation phases that preceded rebounds, including the move that took BTC from around $78,000 to above $108,000 following the April 2025 low.

Derivatives and the Path to Recovery

While the decline in spot activity signals caution, the derivatives market is undergoing a structural reset that could pave the way for the next move. According to XWIN Research Japan, open interest in Bitcoin futures has fallen sharply, reflecting a broad deleveraging phase. Analysts at the institution noted that the recent drop in price was accompanied by falling open interest, indicating that liquidations and derivatives-driven unwinds, rather than aggressive spot selling, drove the decline. This type of reset can stabilize the market, even if it does not immediately signal renewed demand.

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Further complicating the outlook is the options market structure. Coinbase Institutional’s analysis shows a pronounced negative gamma band concentrated between $60,000 and $70,000. When dealers hold negative gamma, their hedging activity can amplify price moves, meaning a break below $60,000 could accelerate selling.

Despite the cautious tone, some on-chain indicators offer a glimmer of stability, with the Binance Fund Flow Ratio remaining low around 0.012, implying limited immediate sell-side pressure. During the recent drop toward the mid-$60,000 region, the ratio did not spike, meaning panic-driven spot inflows were absent.

However, as XWIN Research noted, weak inflows do not equal strong accumulation, and the medium-term trend of demand metrics has not yet turned decisively upward.

For a durable bottom to form, stronger spot volume support will be essential. As it stands, Bitcoin is trading just above $68,000 at the time of writing, down roughly 23% over the past month and more than 46% below its all-time high above $126,000.

Circle sent 63% of Q4 USDC reserve income to distributors, compressing margins.

Circle Internet Financial reported fourth quarter earnings showing the stablecoin issuer paid $460.6 million in distribution and transaction costs against $733.4 million in reserve income, representing approximately 63% of gross yield generated from customer deposits.

The company’s USDC stablecoin circulation reached $75.3 billion at year-end, up 72% year-over-year, according to the earnings report. Reserve income increased 69% while adjusted EBITDA grew fivefold compared to the prior year period.

Total revenue and reserve income reached $770.2 million for the quarter, with distribution costs accounting for nearly 60% of earnings, according to the financial statements. Circle retained $272.8 million in net reserve income after distribution payments.

The company publishes “Revenue Less Distribution Costs” as a core performance metric each quarter. Circle’s net reserve margin settled at 37% in the fourth quarter, meaning the issuer retained approximately $0.37 for every dollar of gross reserve yield.

Stablecoin issuers generate income by holding user deposits in reserve portfolios consisting primarily of short-term Treasury securities and similar instruments. Circle reported a 3.8% reserve return rate in the fourth quarter, down 68 basis points year-over-year. Average USDC in circulation doubled from $38.1 billion to $76.2 billion during the period.

Distribution costs rose 52% year-over-year, according to the earnings report. Circle attributed the increase to “increased distribution payments” to exchanges, wallets, and fintech platforms that provide user access. The prior-year period included a $60 million one-time fee to a distribution partner, previously disclosed.

Circle’s five-quarter trend data shows distributors consistently claimed approximately 63% of reserve income each quarter. Distribution payments are tied to placement agreements and transaction flows rather than fixed technology costs.

The company’s risk disclosures state it may be “unable to maintain existing relationships with financial institutions and similar firms or enter into new relationships.” Circle flags potential pressure to accept “less favorable financial terms” with distribution partners and highlights “dependence on a few key distributors” as a structural constraint.

Circle tracks a metric called “USDC on Platform,” measuring the share of total USDC held across partner platforms. That figure reached $12.5 billion at year-end, up 459% year-over-year, with a daily weighted average of 17.8% of total circulation, according to company data.

Treasury bill yields remained in the mid-3% range as of late February 2026. Market expectations contemplate potential Federal Reserve rate cuts in coming quarters, according to financial market data. A declining rate environment would compress reserve income while distribution costs may prove less flexible, potentially pressuring issuer margins.

Circle’s guidance reflects margin compression relative to the fourth quarter’s 40% RLDC margin, according to the company’s forward-looking statements. The guidance indicates distribution costs may not decline proportionally to reserve income in a lower-rate environment.

In most stablecoin implementations, users do not directly receive yield on their holdings. Issuers earn reserve income and negotiate distribution agreements with platforms that control user access. Distributors do not bear balance sheet risk associated with reserves.

The GENIUS Act, referenced in Circle’s regulatory disclosures, establishes a U.S. framework for payment stablecoins. The legislation formalizes regulatory requirements for stablecoin issuers.

Circle’s operational risk disclosures focus on distributor relationships rather than traditional liquidity concerns. The company states that major partners could change incentive structures, promote competing stablecoins, or develop proprietary infrastructure. Such shifts could reallocate transaction flows and distribution economics.

Circle’s reserves are liquid, audited, and managed conservatively, according to company disclosures. The balance sheet is structured to withstand redemption surges.

The company’s “USDC on Platform” metric monitors concentration of balances across distribution partners. Higher concentration on specific platforms affects negotiating leverage in distribution agreements.

Market dynamics in the stablecoin sector increasingly focus on securing and maintaining distribution relationships with platforms that control user access. Issuers compete for placement on exchanges, wallets, and payment rails that determine transaction flows.

Circle’s fourth quarter results showed the company generated $733.4 million in reserve income and allocated $460.6 million to distribution and transaction costs, leaving $272.8 million in net reserve income before operating expenses.

Circle Internet Financial reported fourth quarter earnings showing the stablecoin issuer paid $460.6 million in distribution and transaction costs against $733.4 million in reserve income, representing approximately 63% of gross yield generated from customer deposits.

The company’s USDC stablecoin circulation reached $75.3 billion at year-end, up 72% year-over-year, according to the earnings report. Reserve income increased 69% while adjusted EBITDA grew fivefold compared to the prior year period.

Total revenue and reserve income reached $770.2 million for the quarter, with distribution costs accounting for nearly 60% of earnings, according to the financial statements. Circle retained $272.8 million in net reserve income after distribution payments.

The company publishes “Revenue Less Distribution Costs” as a core performance metric each quarter. Circle’s net reserve margin settled at 37% in the fourth quarter, meaning the issuer retained approximately $0.37 for every dollar of gross reserve yield.

Stablecoin issuers generate income by holding user deposits in reserve portfolios consisting primarily of short-term Treasury securities and similar instruments. Circle reported a 3.8% reserve return rate in the fourth quarter, down 68 basis points year-over-year. Average USDC in circulation doubled from $38.1 billion to $76.2 billion during the period.

Distribution costs rose 52% year-over-year, according to the earnings report. Circle attributed the increase to “increased distribution payments” to exchanges, wallets, and fintech platforms that provide user access. The prior-year period included a $60 million one-time fee to a distribution partner, previously disclosed.

Circle’s five-quarter trend data shows distributors consistently claimed approximately 63% of reserve income each quarter. Distribution payments are tied to placement agreements and transaction flows rather than fixed technology costs.

The company’s risk disclosures state it may be “unable to maintain existing relationships with financial institutions and similar firms or enter into new relationships.” Circle flags potential pressure to accept “less favorable financial terms” with distribution partners and highlights “dependence on a few key distributors” as a structural constraint.

Circle tracks a metric called “USDC on Platform,” measuring the share of total USDC held across partner platforms. That figure reached $12.5 billion at year-end, up 459% year-over-year, with a daily weighted average of 17.8% of total circulation, according to company data.

Treasury bill yields remained in the mid-3% range as of late February 2026. Market expectations contemplate potential Federal Reserve rate cuts in coming quarters, according to financial market data. A declining rate environment would compress reserve income while distribution costs may prove less flexible, potentially pressuring issuer margins.

Circle’s guidance reflects margin compression relative to the fourth quarter’s 40% RLDC margin, according to the company’s forward-looking statements. The guidance indicates distribution costs may not decline proportionally to reserve income in a lower-rate environment.

In most stablecoin implementations, users do not directly receive yield on their holdings. Issuers earn reserve income and negotiate distribution agreements with platforms that control user access. Distributors do not bear balance sheet risk associated with reserves.

The GENIUS Act, referenced in Circle’s regulatory disclosures, establishes a U.S. framework for payment stablecoins. The legislation formalizes regulatory requirements for stablecoin issuers.

Circle’s operational risk disclosures focus on distributor relationships rather than traditional liquidity concerns. The company states that major partners could change incentive structures, promote competing stablecoins, or develop proprietary infrastructure. Such shifts could reallocate transaction flows and distribution economics.

Circle’s reserves are liquid, audited, and managed conservatively, according to company disclosures. The balance sheet is structured to withstand redemption surges.

The company’s “USDC on Platform” metric monitors concentration of balances across distribution partners. Higher concentration on specific platforms affects negotiating leverage in distribution agreements.

Market dynamics in the stablecoin sector increasingly focus on securing and maintaining distribution relationships with platforms that control user access. Issuers compete for placement on exchanges, wallets, and payment rails that determine transaction flows.

Circle’s fourth quarter results showed the company generated $733.4 million in reserve income and allocated $460.6 million to distribution and transaction costs, leaving $272.8 million in net reserve income before operating expenses.

Key takeaways:

• Bitcoin derivatives show persistent fear despite the current rally toward $70,000, as seen by futures premiums being pinned well below neutral levels.

• The markets’ cautious stance stems from broad risk-aversion and lingering concerns over institutional BTC liquidations and Bitcoin network security.

Bitcoin (BTC) retested the $70,000 level on Wednesday, recovering from Tuesday’s low of $62,500. While inflows into Bitcoin exchange-traded funds (ETFs) helped stabilize market sentiment, the momentum failed to restore confidence within the BTC derivatives markets. Traders remain concerned that underlying factors are preventing a sustained rally toward $75,000.

US-listed Bitcoin ETFs recorded $764 million in net inflows over two days, partially offsetting the $1.2 billion in outflows seen during the previous eight trading days. These large movements are typically attributed to institutional activity, suggesting strong demand when prices dip below $65,000. 

Despite this demand, the appetite for leveraged bullish positions in BTC futures has dropped sharply.

The annualized premium for Bitcoin futures relative to spot markets sat at 2% on Thursday, remaining well below the 5% neutral threshold. Bullish momentum has been largely absent since Jan. 31, the date Bitcoin surrendered the $85,000 support level after holding it for over nine months. Data from the options market further indicates that professional traders are prioritizing the avoidance of downside exposure.

Bitcoin put (sell) options traded at a 14% premium compared to equivalent call (buy) instruments on Thursday. In a neutral market environment, this indicator typically fluctuates between -6% and +6%, signaling that fear remains a dominant force. Although this skew metric has improved from the 28% “panic” levels recorded on Tuesday, the recovery to $70,000 has done little to shift the cautious outlook of derivatives traders.

Is a single entity behind Bitcoin’s price weakness?

Recently, a number of unproven theories have been proposed to explain Bitcoin’s 32% decline over seven weeks. This downward trend began following the Oct. 10, 2025, market crash, which eliminated $19 billion in leveraged positions across the cryptocurrency sector. This volatility coincided with US President Donald Trump announcing a 100% increase in import tariffs on Chinese goods.

Following that event, Binance reportedly provided $283 million in compensation to users affected by liquidations attributed to internal oracle pricing errors, system latency, and asset transfer degradation. Binance co-founder and former CEO Changpeng “CZ” Zhao has since refuted allegations that the exchange intentionally triggered the October 2025 crash.

Other market participants have linked the recent bearishness to concerns over quantum computing. These fears intensified after Jefferies strategist Christopher Wood removed Bitcoin from his “Greed & Fear” model portfolio in January, citing potential risks to long-term security. In response, developers drafted a proposal, BIP-360, which focuses on advancing post-quantum cryptography onchain.

Related: Coin Bureau CEO on Bitcoin in 2026–Cycles, Liquidity and a Divided Market

The most recent explanation for Bitcoin’s lackluster performance involves the quantitative trading firm Jane Street. These claims gained momentum after Terraform Labs’ court-appointed administrator sued the company, alleging insider trading related to transactions that accelerated the collapse of the Terra Luna ecosystem in May 2022.

Jane Street’s recent 13-F filing disclosed significant holdings in BlackRock’s iShares Bitcoin Trust ETF and various Bitcoin mining companies. However, Julio Moreno, head of research at CryptoQuant, noted that such activity is typical for delta-neutral strategies. 

Ultimately, the 5% decline in Nvidia (NVDA US) shares on Thursday following strong earnings suggests a growing risk-averse sentiment among investors, which may partially explain why Bitcoin struggles to reclaim the $75,000 level.