The Federal Reserve has proposed new regulations for stablecoins under the GENIUS Act, focusing on issuer guidelines and stablecoin rewards.
The U.S. Federal Reserve has unveiled two pivotal proposals aimed at regulating stablecoin issuers as part of the implementation of the GENIUS Act. This initiative aligns with efforts from other federal agencies to establish a cohesive regulatory framework for stablecoins.
These proposals, which are open for public comment for 60 days, seek to create guidelines for the issuance of stablecoins, as well as protocols for banks under the Fed's supervision to issue these tokens. While the GENIUS Act requires these regulations to be enacted by July 2026, progress has accelerated in recent months.
One of the proposals addresses the controversial topic of stablecoin rewards, echoing suggestions from the Office of the Comptroller of the Currency (OCC) regarding the prohibition of interest or yield on stablecoin holdings. The Fed indicated that certain third-party arrangements might be considered prohibited payments of interest, suggesting a cautious approach to allowing crypto platforms to offer stablecoin incentives akin to credit card rewards.
The regulatory framework proposed by the Fed includes capital and reserve requirements to ensure that stablecoins are backed by liquid assets, thereby safeguarding issuers against financial stress. The second proposal outlines the process for regulated banks to issue their own stablecoins, which will require a detailed business plan and financial disclosures.
Fed Governor Michael Barr emphasized the importance of stability in stablecoin redemption, stating, "Stablecoins will only be stable if they can be reliably and promptly redeemed at par under various conditions," highlighting the need for resilience during market fluctuations.
These developments follow a series of initiatives from the Treasury Department and the Federal Deposit Insurance Corporation, which have also been working towards the implementation of the GENIUS Act. The Treasury recently proposed definitions and compliance requirements for U.S. stablecoin issuance, while the FDIC began its regulatory process in December, marking the first federal step towards this legislation. Discussions around stablecoin user identification have also emerged, aiming to align practices with those of other regulated financial entities.
