There is no doubt that in many ways cryptocurrency is going mainstream. It is showing up in a surprisingly wide variety of places for a wide variety of reasons. In the following guest post, Sarah Abrams, Head of Claims Baleen Specialty, a division of Bowhead Specialty, takes a look at recent suggestions that merchants could substitute stablecoin rewards as a form of customer loyalty payment and considers the potential D&O insurance underwriting implications. I would like to thank Sarah for allowing me to publish her article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah’s article.
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A recent Bloomberg Opinion piece presented the opportunity for merchants to substitute stablecoin rewards for credit card points as profitable and also likely to occur in the near future. The thesis is certainly an attractive one; if customers can be persuaded to use stablecoins, retailers with points-based loyalty programs may see a boost to profit margins. In part because the recently passed Guiding and Establishing National Innovation for U.S. Stablecoins (Genius) Act (Genius Act) appears to leave a loophole: while interest earned on stablecoins is banned, stablecoin issuers (in partnership with retailers or airlines) may still be able to distribute rewards, such as loyalty points, discounts, or benefits tied to stablecoin use.
Businesses that adopt stablecoin-based rewards can potentially generate income from the invested assets backing the stablecoins’ value, while also avoiding traditional credit card swipe fees by shifting away from points-based programs. According to the Bloomberg Opinion, the rewards program would likely involve a merchant partnering with stablecoin specialists to create proprietary blockchain payment networks (reward stablecoins) and also collaborating with buy-now-pay-later companies, like Affirm.
This begs the question for D&O underwriters: if stablecoins are poised to become a favored alternative for companies looking to reward customer loyalty, will there be increased D&O exposure? Below is a discussion of another emergent crypto-related D&O risk following the passing of the GENUIS Act, including how the use of stablecoins as an alternative for reward points may impact D&O exposure.
The GENIUS Act
On July 18, 2025, the GENUIS Act was signed into law, representing the United States’ first major step toward establishing a regulatory framework for stablecoins. As D&O Diary readers may recall, stablecoins are a cryptocurrency designed to maintain a stable level of purchasing power by being pegged to a reference asset like fiat money, exchange-traded commodities, or another cryptocurrency. Stablecoins, like most cryptocurrencies, use cryptography for security and operate on a blockchain. The blockchain is a distributed ledger technology that records and secures crypto transactions.
A key provision of the GENUIS Act allows only permitted payment stablecoin issuers (PPSIs), such as insured depository institution subsidiaries, OCC-approved nonbanks, or similarly regulated state-level issuers, to issue payment stablecoins in the U.S. The GENUIS Act also explicitly prohibits issuers from paying interest to coin holders, a measure designed to prevent stablecoins from functioning as unregulated deposit accounts and to protect banks and money market funds from disintermediation. However, as previously highlighted, the GENUIS Act is silent on non-interest forms of customer benefit, such as merchant reward benefits.
This may allow for creative structuring of reward-based programs for customers. If companies are beginning to scope integration of stablecoin-rewards, D&O underwriters may want to know. Below, I discuss anticipated D&O risks stemming from a potential shift to a merchant stablecoin-rewards program in more detail; however, it may first be helpful to understand how such a program may be structured.
Stablecoins Rewards
In theory, a stablecoin-rewards program should look like a credit card rewards program, with consumers earning points, miles, or cash back every time they spend. Instead of swiping a credit card and earning points or cash back funded by interchange fees, a customer could pay with a retailer-branded stablecoin and earn loyalty perks. Purportedly, the loyalty perks may be funded by the savings from lower transaction costs (no “swiping fees”) and the income generated from invested assets, like Treasury bills, backing the merchant’s stablecoin.
Just as credit card points can be redeemed for travel, merchandise, or statement credits, a “Bonvoy Coin” or “Lowes Coin” could potentially be redeemed for store discounts, free nights, or bundled services. The difference is that the value loop runs through the retailer and stablecoin issuer, not a bank and card network. The Bloomberg Opinion points out that big banks may see this threat coming, and that some have been developing their own blockchain-based payments, which could partner with retailers and airlines as they do for branded credit cards.
D&O Implications
Yields v. Rewards
While the lack of credit card swiping fees may be attractive, an initial concern for merchants eager to switch to a stablecoin-rewards program may be whether yields on assets backing the stablecoin will stay at a set rate. The Bloomberg Opinion noted that yields available on assets backing stablecoins can change over time. For example, if a company is using short-term Treasury bills as asset backing its stablecoins, recently, there has been a 4.1% yield on three-month Treasury bills. However, in 10 of the past 16 years, short-term Treasury yields have been closer to zero.
In addition, corporate conflicts may arise if one company is unable to back its stablecoin rewards. Often, airlines and hotels allow for the sharing of rewards with one another. However, if there is an issue with a stablecoin value tied to a reward, reward partnerships may be discontinued, leaving consumers with “worthless” stablecoins. Both scenarios may hurt brand loyalty and, potentially, corporate profitability.
If either occurs, shareholder inquiries surrounding board and executive approval for changing from credit card points to stablecoin rewards may lead to a derivative lawsuit. In addition, if a stock drop accompanies an announcement regarding the negative impact of switching to stablecoin rewards, securities litigation may also be filed. As D&O underwriters know, increased litigation risk may result in increased exposure to a D&O insurance program.
Along with the potential for increased shareholder and consumer litigation, stablecoin rewards programs may draw regulatory scrutiny.
Regulatory Scrutiny
Under the GENIUS Act, only PPSIs may issue these stablecoins in the U.S., and the stablecoin issuance must be regulated either at the federal level by various agencies, including the Office of the Comptroller of the Currency (OCC) and Consumer Financial Protection Bureau (CFPB), or at the state level through certified regimes that align with federal standards.
The act further provides that the OCC and CFPB will have regulatory oversight over disclosures, redemptions, and marketing practices. Thus, if merchants begin to partner with stablecoin servicers and buy-now-pay-later companies to roll out a stablecoin rewards program, regulatory inquiries from the OCC and CFPB may follow.
Notably GENIUS Act excludes stablecoins from classification as securities or commodities, thereby limiting the oversight role of the SEC and CFTC, and the Federal Reserve may only exercise enforcement authority in exigent circumstances, including for state-regulated issuers. Therefore, for D&O programs with regulatory coverage, risk of exposure may stem from OCC and CFPB inquiries, but may not necessarily arise from SEC or CFTC subpoenas or actions. With the caveat that administration changes may impact regulatory initiatives and scope of oversight.
Conclusion: An Emerging D&O Frontier
Whether reward stablecoins will supplant reward credit cards remains to be seen. However, if GENIUS Act may have cleared the way for merchants to pivot loyalty programs from credit cards to stablecoins. For companies and carriers, the potential for lower transaction costs and stronger customer retention may result in higher regulatory and litigation risks.
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