Fed Proposes Stablecoin Reserve and Bank-Issuance Rules

The Federal Reserve has proposed two regulatory frameworks implementing its responsibilities under the GENIUS Act, setting detailed standards for stablecoin reserves, redemptions, capital and bank-owned issuers. According to the Fed’s official September 24 announcement, the first proposal governs Board-supervised permitted payment stablecoin issuers, while the second establishes an application process for insured State member banks seeking to issue stablecoins through subsidiaries. Both are proposed rules rather than final requirements, with public comments due November 30.

The broader proposal requires issuers to maintain reserve assets whose fair value equals or exceeds outstanding stablecoin liabilities at all times. Eligible assets include dollars, Federal Reserve balances, qualifying deposits, Treasuries with no more than 93 days remaining to maturity, specified overnight repo arrangements and eligible investment funds. The Fed would require issuers to record reserve fair values at least once every calendar day while remaining continuously 1:1 backed. This regulatory emphasis on liquid government assets parallels the growing use of tokenized Treasury strategies designed around stablecoin-reserve requirements.

Redemption and Capital Rules Add Operational Constraints

Stablecoin holders would generally have to receive fiat redemption no later than two business days after submitting a request. The Board could extend that period for safety, financial-stability or public-interest reasons, while separate safe harbors cover delays caused by required sanctions, AML or customer-due-diligence checks and circumstances outside an issuer’s control. The proposal creates a two-business-day outer limit rather than a mandatory stressed-market redemption queue. Governor Michael Barr separately argued that clear universal redemption rights would be important to public confidence in stablecoins.

Capital would sit on top of the reserve requirement rather than replace it. Newly formed Board-supervised issuers would face a $5 million minimum during a three-year de novo period, subject to GDP indexing and possible supervisory adjustment. Credit-risk capital would apply to exposures such as uninsured deposits and undercollateralized reverse repos, while operational-risk requirements would scale with issuance, non-reserve revenue and historical losses. The operational framework explicitly captures risks including unauthorized minting, custody failures and other technology-driven losses. Those risks are increasingly relevant as banks expand into products such as bank-issued stablecoins distributed through third-party infrastructure.

Reporting would also become more intensive. Board-supervised issuers would submit confidential data to the Fed weekly, publish monthly reserve-composition reports examined by a registered public accounting firm and certify those reports through senior management. Weekly supervisory reporting and monthly public reserve disclosures are separate obligations, while reserve values themselves must be monitored at least daily.

State Member Banks Get a Separate Approval Path

The second proposal applies specifically to insured State member banks seeking approval for a subsidiary to become a Board-supervised stablecoin issuer. Applications would require a business plan, financial projections, reserve-management plans, governance information, capital structure and details about material third parties, including entities involved in market making or controlling private keys. Once an application is substantially complete, the Board generally has 120 days to decide, with an appeal and hearing process available after denial.

The framework would create a more defined route for banks entering a market where conventional financial institutions are already experimenting with tokenized settlement. Visa, for example, has begun offering USDC settlement to participating U.S. banks, while the broader industry continues debating the competitive effects of stablecoin yield restrictions on bank deposits and lending. The Fed proposals do not authorize every U.S. bank or stablecoin issuer under one uniform regime; they implement the Board’s specific portion of the multi-regulator GENIUS Act framework.

The next concrete milestone is the close of the public-comment period on November 30. Reserve composition, capital calibration, redemption rights and the bank-application process can still change before final rules are adopted, making the eventual Federal Reserve rulemaking, rather than the September proposals themselves, the operative regulatory milestone for Board-supervised issuers.