Fed Proposes Stablecoin Regulations, Invites Public Feedback

The US Federal Reserve has invited public feedback on two proposals for regulating stablecoins. The proposals aim to create a framework for stablecoin issuers supervised by the Fed under the GENIUS Act. One proposal focuses on the contents of the reserves that back stablecoins, requiring full backing with permissible reserve assets such as short-term Treasury bills. Issuers will also have to maintain reserves against their notes and adhere to standardized capital requirements addressing credit and operational risks.

The second proposal addresses a bank's entry into the space, proposing a tailored application process for banks seeking to issue stablecoins. This includes submitting a business plan, financial statements, and other items, with provisions for appeals and judicial review. The proposals also touch on custody, risk management, and the approval process for banks.

The Fed has called for public feedback within 60 days of publication in the Federal Register. This comes as similar issues are being discussed in Europe, with the European Central Bank and EU national central banks reopening the discussion of the 60% deposit requirement for significant stablecoin issuers under the Markets in Crypto Assets (MiCA) regulation.