Regulatory-Compliant Yield in Stablecoins: Anchorage Digital's GENIUS Act-Enabled Rewards Program for Institutions

The U.S. crypto regulatory landscape has long posed a dilemma for institutional investors: how to generate yield on stablecoin holdings without violating federal restrictions on interest payments. This challenge has been met head-on by Anchorage Digital, a federally chartered crypto bank, through its GENIUS Act-enabled rewards program for institutional holders of USDtb and USDe. By leveraging a structurally innovative framework and a separate legal entity, Anchorage Digital is pioneering a model that aligns capital efficiency with regulatory compliance, offering a blueprint for institutions navigating the evolving crypto ecosystem.

A Regulatory Workaround: The GENIUS Act Framework

The GENIUS Act explicitly prohibits stablecoin issuers from paying interest directly to users according to the Act, a restriction designed to prevent systemic risks in the stablecoin market. However, it permits yield-like incentives through indirect mechanisms. Anchorage Digital has capitalized on this nuance by establishing Anchorage Digital Neo Ltd., a subsidiary that operates independently from its banking arm. This separation allows the program to distribute rewards on USDtb and USDe without violating the Act's constraints as reported.

USDtb, backed by short-term U.S. Treasuries and tokenized money market funds from BlackRock according to market analysis, and USDe, collateralized by crypto assets like Bitcoin and Ether according to market analysis, serve as the foundation for this program. By decoupling reward distribution from direct interest payments, Anchorage Digital ensures compliance while enabling institutional clients to earn passive income on otherwise idle holdings.

Yield Structure: Flexibility and Capital Efficiency

The rewards program offers institutional investors a unique combination of flexibility and security. Participants can lock Bitcoin on the Mezo platform via veBTC to generate returns from on-chain network fee sharing as the platform reports. Lock periods range from 6 to 30 days, with higher yields incentivizing longer-term commitments. This structure mirrors traditional liquidity management strategies but adapts them to the crypto-native context.

Moreover, the program integrates borrowing capabilities through Anchorage Digital's Porto wallet. Clients can leverage their BTC holdings to borrow against MUSD, Mezo's stablecoin, at low fixed rates starting at 1%. This dual functionality-earning yield while maintaining liquidity-addresses a critical pain point for institutions seeking to optimize capital without exposing themselves to regulatory overreach.

Compliance and Risk Mitigation

Anchorage Digital's approach is underpinned by a robust compliance framework. The use of a separate entity, Anchorage Digital Neo Ltd., ensures that reward distributions do not interfere with the bank's core operations or regulatory obligations as the company reports. Additionally, the program is self-funded, relying on network fees and collateralized assets rather than external capital as the company reports. This design minimizes counterparty risk and aligns with the Federal Deposit Insurance Corporation's (FDIC) emphasis on risk management in crypto custody.

The collateralization of USDtb and USDe further enhances security. USDtb's backing by U.S. Treasuries provides a low-risk, liquid asset base according to market analysis, while USDe's crypto collateral is managed through transparent, auditable protocols according to market analysis. For institutions, this duality offers a spectrum of risk-adjusted return opportunities, from near-zero-risk yields on USDtb to higher-yield, crypto-collateralized strategies with USDe.

Implications for the Institutional Market

Anchorage Digital's initiative signals a broader shift in how institutions can engage with stablecoins. By demonstrating a compliant pathway to yield generation, the program challenges the notion that regulatory constraints inherently limit innovation. It also sets a precedent for other crypto custodians and stablecoin issuers to explore similar structures, potentially accelerating the adoption of federally sanctioned crypto financial products.

For institutional investors, the program represents a strategic tool to navigate the dual pressures of capital preservation and return generation. In an environment where traditional fixed-income yields remain subdued, the ability to earn risk-managed, regulatory-compliant returns on stablecoin holdings becomes increasingly valuable.

Conclusion

Anchorage Digital's GENIUS Act-enabled rewards program exemplifies how institutional-grade crypto strategies can thrive within regulatory boundaries. By combining structural innovation, transparent collateralization, and flexible yield mechanisms, the program addresses the core needs of institutional investors: compliance, capital efficiency, and risk mitigation. As the U.S. crypto regulatory framework continues to evolve, initiatives like this will likely serve as a benchmark for future innovation, proving that regulatory alignment and financial innovation are not mutually exclusive but complementary forces.