Fed Cracks Down on Stablecoins: Proposes Tough New Rules

The Federal Reserve has proposed rules to tighten stablecoin regulations under the GENIUS Act. The proposals, released on September 24th, are open for 60 days of public comment.

Stablecoin issuers supervised by the Fed would be required to back every token with cash or liquid assets and hold operational-risk capital. Issuers would have to maintain reserves that match or exceed the par value of tokens in circulation at all times.

The rules also outline a tiered system for operational-risk capital, ranging from 2% on the first $20 billion of tokens outstanding to 1% above $50 billion. The Fed's Board has proposed that issuers publish a redemption policy and file confidential weekly reports on issuance, redemptions, and reserves.

Federal Reserve Governor Michael Barr backed the proposal but flagged concerns over a provision limiting the Fed's ability to act on an issuer's anti-money laundering lapse unless it is significant or systemic.