Fed Proposes Stablecoin Rules Under GENIUS Act

The Federal Reserve has proposed a framework for bank subsidiaries to issue stablecoins under the GENIUS Act, which was signed into law last summer.

The proposal sets regulatory requirements for authorized stablecoin issuers that fall under the central bank's purview, including state member banks of the Federal Reserve System and other state-chartered institutions with $10 billion or more in stablecoins.

The GENIUS Act directed the Fed, FDIC, OCC, and NCUA to issue rules effectuating the various elements of law, including regulatory and supervisory oversight. The proposal outlines that permitted payment stablecoin issuers will be required to fully back their stablecoins with 'permissible reserve assets,' including short-term Treasury bills and other high-quality liquid assets.

Fed Gov. Michael Barr noted that he was encouraged by key provisions of the GENIUS Act, including reserve asset limitations and capital requirements. However, he expressed concerns about how the stablecoin framework would work alongside the Fed's revised standards for money laundering oversight.