Fed Proposes Rules for Stablecoin Issuers, Triggers 48-Hour Liquidation Run

The Federal Reserve has proposed new rules for payment stablecoin issuers it supervises. A key provision of the proposal would trigger a 48-hour liquidation run if an issuer's reserves fall below the value of its outstanding tokens.

The Fed's rules require issuers to formally record the fair value of their reserve assets at least once a day, and reserve assets must equal or exceed outstanding tokens at all times. If an issuer breaches this requirement, it would have 24 hours to notify the Fed and submit a plan to restore full backing.

If the issuer fails to close the gap or the Fed directs it to proceed with the plan, it must begin liquidating reserves and redeeming tokens by 5 p.m. on the next business day. The proposal also allows issuers to keep minting new tokens during this rescue window, but only if they are operating on a public blockchain.

The OCC has proposed a different approach, requiring issuers under its supervision to stop net new issuance immediately if their reserves fall below minimum requirements. This rule would not trigger liquidation until 15 consecutive business days have passed.