Fed proposes capital and redemption rules for stablecoin issuers
The Federal Reserve has set out capital charges, a two-day redemption window and monthly reserve disclosures for stablecoin issuers as it implements the GENIUS Act.
Key points
- Issuers would face an operational-risk capital charge of 2% on the first $20bn of stablecoins outstanding, 1.5% on the next $30bn and 1% above $50bn.
- Redemptions would generally have to be processed within two business days.
- Issuers would publish monthly reports on outstanding tokens and reserve value and composition, examined by a registered public accounting firm and certified by the CEO and CFO.
- A separate proposal covers applications from Fed-supervised banks wanting to issue payment stablecoins through subsidiaries.
- Governor Michael Barr backed the plan on Thursday but said universal redemption rights should be clear in the final rule.
The Federal Reserve has proposed capital, redemption and other requirements for stablecoin issuers under its supervision, as it works to implement the GENIUS Act, CoinTelegraph reports. The proposal sets out how issuers would be capitalised, how quickly they must redeem tokens and what they must disclose about their reserves.
The GENIUS Act already requires issuers to hold reserves backing their tokens one to one and limits the assets they may hold, including cash, bank deposits and short-term US Treasurys. It left federal regulators to write more detailed rules on capital, reserve diversification and risk management.
Under the Fed plan, issuers would face an operational-risk capital charge equal to 2% of the first $20 billion in stablecoins outstanding, 1.5% of the next $30 billion and 1% of amounts above $50 billion. Additional capital requirements would be tied to credit and operational risks.
Capital charges and redemptions
Issuers would generally have to process redemptions within two business days. If reserves fell below the required one-to-one backing, an issuer would have to notify the Fed and either restore reserves under a remediation plan or liquidate them and redeem outstanding stablecoins.
Issuers would also have to publish monthly reports detailing their outstanding stablecoins and the value and composition of their reserves. Those disclosures would have to be examined by a registered public accounting firm and certified by the issuer's chief executive and chief financial officer.
A separate proposal would create an application process for Fed-supervised banks seeking approval to issue payment stablecoins through subsidiaries, including requirements to submit a business plan and financial information. Both proposals are open for public comment for 60 days after publication in the Federal Register.
Monthly reserve disclosures
Fed Governor Michael Barr supported the proposal on Thursday but said more work was needed for stablecoins to become reliable payment instruments. He said they would only be stable if they could be reliably and promptly redeemed at par in a range of conditions, including during market stress. Barr welcomed the proposed limits on reserve assets and standardised capital requirements, and called for feedback on whether the framework addresses interest-rate and foreign-currency risks. He also said universal redemption rights should be clearly established in the final rule, and raised concerns about a standard that would stop the Fed acting on an anti-money laundering deficiency unless it were considered significant or systemic. The GENIUS Act takes effect on 18 January 2027, or 120 days after federal regulators issue final implementing rules, whichever comes first.