Out of curiosity, in the hypotethical future case where the custody accounts would start to "pay" negative interest, what would happen to USDC?

To me, there are only a limited set of options:

1. the peg fails

2. the custody accounts are switched to riskier assets - with or without knowledge of USDC holders. This, of course, has implications to the "stablecoin" status. One could even argue that USDC becomes a de facto fractional reserve bank at this point.