The Federal Reserve has proposed new regulations for stablecoin issuers, focusing on reserve backing, redemption requirements, and capital requirements.
The Federal Reserve announced new proposed regulations on September 24, aimed at establishing guidelines for payment stablecoin issuers as part of the GENIUS Act implementation.
Key aspects of the proposals require that payment stablecoins be fully backed by secure reserve assets, such as U.S. Treasury bills. Issuers must meet redemption requests within two business days, and if a stablecoin's collateral falls below a 1:1 backing, they must inform the Fed and provide a recovery strategy or start liquidating assets to fulfill redemptions.
Monthly reporting of reserve compositions will also be required, with audits conducted by registered firms. The regulations propose a tiered capital requirement based on the volume of stablecoins issued, with rates of 2% for the first $20 billion, 1.5% for the next $30 billion, and 1% for amounts beyond $50 billion.
The second proposal outlines the application process for federally supervised banks wishing to issue payment stablecoins through subsidiaries. This includes submitting business plans and financial details, along with established procedures for appeals and decision-making processes.
Michael Barr from the Fed's Board of Governors supported the proposals but emphasized the need for clearer rules on redemption rights and better risk assessments.
Public comments on these proposals will be accepted for 60 days after they are published in the Federal Register. The GENIUS Act, signed into law by President Donald Trump in July 2025, is set to take effect in 2027 or after the final regulations are issued, whichever comes first.
