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Fed proposes new capital, redemption rules for stablecoin issuers
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- DeepHorus
The Federal Reserve has proposed new capital, redemption and regulatory requirements for stablecoin issuers under its supervision, advancing the implementation of the GENIUS Act. The framework would establish a tiered operational-risk charge, a generally two-business-day redemption window and more frequent reserve disclosures. The proposals are not final and would enter a 60-day public-comment period after publication in the Federal Register.
The GENIUS Act already requires stablecoins to be backed one-for-one by qualifying reserves and limits eligible assets, including cash, bank deposits and short-term US Treasurys. It also gives federal regulators authority to set more detailed capital, reserve-diversification and risk-management standards. The Fedâs proposal seeks to translate those broad statutory requirements into operational rules for supervised issuers. Its adoption could reshape how companies hold capital and manage redemption demand.
Under the capital proposal, issuers would face an operational-risk charge of 2% on the first $20 billion of stablecoins outstanding, 1.5% on the next $30 billion and 1% on amounts above $50 billion. These tiers would be supplemented by additional capital requirements tied to credit and operational risks. The graduated structure would make capital obligations greater for larger issuance programs while giving issuers a defined baseline for Fed oversight.
Issuers would generally have to complete redemptions within two business days. If their reserves fell below the required one-to-one backing, they would have to notify the Fed and either restore reserves under a remediation plan or liquidate reserves and redeem outstanding stablecoins. The provisions are intended to link redemption promises to enforceable asset-management procedures, particularly when confidence in an issuer or its counterparties weakens.
Transparency would also tighten under the proposal. Issuers would publish monthly reports showing the quantity of stablecoins outstanding and the value and composition of their reserves. A registered public accounting firm would examine those reports, and the issuerâs chief executive and chief financial officer would certify them. Separately, the Fed would create an application process for supervised banks seeking permission to issue payment stablecoins through subsidiaries, requiring a business plan and financial information.
Fed Governor Michael Barr supported the proposal but emphasized that reliable, prompt redemption at par must hold across market conditions. He said stablecoins could face pressure even when backed by liquid government debt during broad market stress or strain affecting an individual issuer or related entities. Barr welcomed the reserve-asset limits and standardized capital requirements while seeking feedback on interest-rate and foreign-currency risks. He also called for clear universal redemption rights and raised concerns about a proposed standard that could restrict anti-money-laundering enforcement unless deficiencies were deemed significant or systemic.
For issuers, the proposal could increase compliance and capital-planning demands while giving customers more timely information about reserve adequacy. The two-day standard would make liquidity management a central part of operating a stablecoin, rather than treating backing solely as a balance-sheet test. The GENIUS Act is set to take effect on Jan. 18, 2027, or 120 days after federal regulators issue final implementing rules, whichever comes first. The next phase will be the public-comment process, followed by revisions and a final decision on the scope of issuer and bank requirements.
