Fed Proposes Stablecoin Regulation Framework Under GENIUS Act
The Federal Reserve has taken a significant step towards regulating stablecoins in the US financial system by proposing a framework for their issuance under the GENIUS Act. The proposal, released on September 24, would require stablecoin issuers to fully back their tokens with permitted reserve assets, including short-term U.S. Treasury bills and other high-quality, liquid assets.
The Federal Reserve's goal is to ensure that stablecoins can be redeemed for their value at par, even during periods of market stress. This requirement addresses one of the key concerns surrounding stablecoins: their ability to maintain confidence in their redemption value.
The proposed framework would introduce standardized capital requirements and risk-management standards to address credit and operational risks associated with stablecoin activities. Additionally, the Federal Reserve would clarify which stablecoin-related activities are permissible for banks under its supervision.
The proposal is part of the implementation process for the GENIUS Act, which provides the legal foundation for regulating stablecoins. The Federal Reserve is seeking public comment on the proposal, and stakeholders can raise concerns or recommend changes within a 60-day comment period.