Fed Proposes Tiered Capital Charge for Payment Stablecoin Issuers

The Federal Reserve has proposed a tiered operating-risk capital charge for covered payment stablecoin issuers, starting at 2% on the first $20 billion outstanding. This means that more coins in circulation would result in a larger baseline operational-risk charge, even if the issuer earns nothing from custody or other activities.

The proposal was announced alongside a separate plan for how insured state member banks would apply to issue payment stablecoins through subsidiaries. The capital formula belongs to the proposed regulatory framework for Board-supervised issuers.

Under the proposal, a hypothetical payment stablecoin issuer within the Federal Reserve's supervisory scope, with $1 billion in circulation and no revenue from activities outside its reserve assets, would start with a $20 million baseline operational-risk capital charge. The final charge depends on a loss adjustment, which can move the operating-risk charge up or down in response to realized losses.

The Fed also proposes a separate 2% capital charge on reserve assets that are uninsured deposit claims or undercollateralized reverse repurchase agreements. This possible credit-risk charge sits apart from the operational-risk calculation.