Federal Reserve Outlines Stablecoin Rules Under GENIUS Act

The Federal Reserve has proposed new capital, redemption and regulatory standards for stablecoin issuers under its supervision as part of its implementation of the GENIUS Act. The GENIUS Act already requires issuers to maintain reserves backing their stablecoins on a one-to-one basis and restricts eligible reserve assets to categories including cash, bank deposits and short-term US Treasurys.

However, the legislation left federal regulators responsible for developing more detailed requirements covering capital, reserve diversification and risk management.

Fed proposes capital and redemption rules

Under the Federal Reserve’s proposal, stablecoin issuers would face an operational-risk capital charge based on the value of tokens in circulation. The requirement would equal 2% of the first $20 billion in outstanding stablecoins, 1.5% of the next $30 billion and 1% of amounts exceeding $50 billion. Issuers could also face additional capital requirements related to credit and operational risks.

Stablecoin redemptions would generally need to be completed within two business days. If an issuer’s reserves fell below the required one-to-one backing level, it would have to notify the Fed and either restore the shortfall under a remediation plan or liquidate its reserves and redeem the outstanding stablecoins.

Issuers would also be required to publish monthly reports detailing the amount of stablecoins in circulation and the value and composition of their reserves. The disclosures would need to be examined by a registered public accounting firm and certified by the issuer’s CEO and CFO.

Fed sets path for banks to issue stablecoins

A separate proposal would establish an application process for Fed-supervised banks seeking permission to issue payment stablecoins through subsidiaries. Banks applying to do so would need to provide information including a business plan and financial details as part of the approval process. Both proposals will remain open for public comment for 60 days following their publication in the Federal Register.

Barr calls for reliable stablecoin redemptions

Federal Reserve Governor Michael Barr supported the proposal on Thursday but said additional work would be necessary to ensure stablecoins can function reliably as payment instruments. “Stablecoins will only be stable if they can be reliably and promptly redeemed at par in a range of conditions. This includes during market stress, when pressure can be put on the value of even otherwise liquid government debt, and during episodes of strain on the individual issuer or its related entities,” Barr said.

Barr welcomed the proposed restrictions on reserve assets and standardized capital requirements but called for feedback on whether the framework sufficiently addresses interest-rate and foreign-currency risks. He also argued that universal redemption rights should be clearly established in the final rules. Additionally, he raised concerns about a provision that could prevent the Fed from taking supervisory or enforcement action over an Anti-Money Laundering deficiency unless the problem is considered “significant or systemic.”

The GENIUS Act is scheduled to take effect on Jan. 18, 2027, or 120 days after federal regulators issue their final implementing rules, whichever occurs first.

Sources:

https://cointelegraph.com/news/fed-proposes-new-capital-redemption-rules-for-stablecoin-issuers

https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20260924a3.pdf

https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20260924a4.pdf

https://www.congress.gov/119/plaws/publ27/PLAW-119publ27.pdf