Fed proposes new capital, redemption rules for stablecoin issuers

The Federal Reserve unveiled a proposal setting capital, redemption and reporting requirements for stablecoin issuers it supervises, advancing implementation of the GENIUS Act. The statute already mandates that issuers back tokens one-to-one with limited asset types such as cash, bank deposits and short-term U.S. Treasurys; the Fed’s proposal fills in additional supervisory details on capital, reserve diversification and risk management. Under the draft rule, issuers would face an operational-risk capital charge graduated by scale: 2% on the first $20 billion of stablecoins outstanding, 1.5% on the next $30 billion and 1% on amounts above $50 billion. The Fed would also impose other capital requirements linked to credit and operational risks, although the proposal text outlines rather than finalizes the full calibration. On redemptions and reserve shortfalls, the proposal generally requires issuers to process redemptions within two business days. If an issuer’s reserves fall below the legally required one-to-one backing, it must notify the Fed and either restore reserves under a remediation plan or liquidate reserves and redeem outstanding tokens. The package would also require monthly public disclosures detailing the number of outstanding stablecoins and the value and composition of reserves. Those reports would need to be examined by a registered public accounting firm and certified by the issuer’s CEO and CFO. Separately, the Fed proposed an application process for Fed-supervised banks seeking permission to issue payment stablecoins through subsidiaries, including submission of a business plan and financial information. The proposals will be open for 60 days of public comment after publication in the Federal Register. Fed Governor Michael Barr voiced support for the proposal while saying more work is needed to ensure stablecoins remain redeemable under market stress; he also urged clarity on universal redemption rights and flagged concerns about limitations on supervisory action for certain anti-money-laundering deficiencies. The GENIUS Act is scheduled to take effect on Jan. 18, 2027, or 120 days after federal regulators issue final implementing rules, whichever comes first.