Fed Proposes New Stablecoin Rules Focusing on Reserves and Capital

The U.S. Federal Reserve has invited public input on two proposals aimed at creating a framework for stablecoins issued by payment stablecoin issuers supervised under the GENIUS Act.

The proposals, published in the Federal Register on September 24, concern reserves, capital, risk management, and custody, as well as the approval process for banks seeking to issue stablecoins.

The first proposal focuses on the contents of the reserves that back stablecoins, requiring issuers to fully back their stablecoins with permissible reserve assets such as short-term Treasury bills. The Fed would also establish standardized capital requirements to address credit and operational risks arising from payment stablecoin activities.

The second proposal outlines a specific process for banks seeking to issue payment stablecoins, involving a tailored application that includes a business plan, financial statements, and other items. The Fed would also clarify what activities related to stablecoins Board-supervised entities could undertake.