The US Federal Reserve has proposed new rules for payment stablecoins, setting out reserve, capital and risk-management requirements as regulators continue implementing the federal framework created by the GENIUS Act.
The Federal Reserve Board released two proposals covering payment stablecoin issuers under its supervision and Fed-supervised banks seeking approval for subsidiaries to issue stablecoins.
The first proposal would require Board-supervised payment stablecoin issuers to fully back their tokens with permitted reserve assets.
Those assets could include short-term US Treasury bills and certain other high-quality, liquid investments intended to ensure issuers can meet customer redemptions.
Stablecoins are digital tokens designed to maintain a stable monetary value, commonly by reference to the US dollar. Their reliability therefore depends heavily on the quality and liquidity of the assets held against outstanding tokens.
The proposal would also introduce standardised capital requirements addressing credit and operational risks associated with payment stablecoin activities.
Issuers would face additional risk-management standards, while Fed-supervised firms that safeguard assets backing stablecoins would become subject to specific rules governing those activities.
The Federal Reserve also intends to clarify which stablecoin and related activities can be undertaken by banks already under its supervision.
A second proposal deals with the approval process for Fed-supervised insured depository institutions seeking to establish subsidiaries that issue payment stablecoins.
Applicants would have to provide a business plan, financial information and other supporting documents.
The framework would also establish procedures governing appeals, hearings and final determinations on applications.
The proposals implement responsibilities assigned to the Federal Reserve under the GENIUS Act, which established a federal regulatory structure for payment stablecoins. The US move forms part of a wider shift towards a more formal FCA Targets London Crypto Trading | Lawyer Monthly across major financial markets.
For banking and fintech lawyers, they provide significantly more detail about how that statutory regime could operate in practice.
Reserve requirements are particularly important because they determine whether issuers can honour redemption requests during periods of financial stress.
Federal Reserve Governor Michael Barr said stablecoins would only function reliably as payment instruments if holders could redeem them promptly at par under a range of conditions, including periods of market strain.
Barr said he supported the proposed restrictions on reserve assets and the use of transparent, standardised capital requirements, while calling for public feedback on whether the framework adequately addresses interest-rate and foreign-currency risks.
He also said clear universal redemption rights would be important to maintaining public confidence.
Barr separately raised concerns about how anti-money-laundering deficiencies would be treated under the developing regime, saying he wanted the issue addressed before final rules are adopted.
For issuers, the proposals show that US stablecoin regulation is moving from broad statutory principles towards detailed prudential supervision.
Compliance could therefore involve not only maintaining sufficient reserves but also satisfying a wider set of FCA CP26/23 Consumer Duty Carve-Out – Lawyer Monthly covering capital, operational risk, custody and governance
Banks seeking to enter the market through stablecoin-issuing subsidiaries would additionally face a formal Federal Reserve approval process.
The measures are not yet final.
The Federal Reserve will accept comments for 60 days after the proposals are published in the Federal Register and could amend the framework before adopting final regulations.
For stablecoin issuers, banks and their advisers, that consultation period provides an opportunity to influence how the GENIUS Act is translated into detailed supervisory rules for NYSE and Blockchain.com Explore Tokenised US Stocks | Lawyer Monthly
The final framework could play a significant role in determining which institutions enter the US payment-stablecoin market and how closely those products become integrated with the regulated banking system.