Fed Proposes Stablecoin Rules with Strict Capital Requirements

The Federal Reserve has released two proposed rules for stablecoins, which aim to regulate the issuance of dollar tokens. The first proposal sets out the terms for an insured state member bank to seek approval for a subsidiary that issues payment stablecoins. This route is available only to banks with national charters and their primary regulator would be the Office of the Comptroller of the Currency.

The second proposal governs the issuer, its reserves, and its capital. It proposes an initial capital floor of $5 million for new issuers during their first three years. The proposed 2% capital charge on uninsured reserve deposits would equal $20 million on a $1 billion exposure. An issuer passing $10 billion in outstanding coins would face a 360-day transition or stop net new issuance.

The Fed's application process has two clocks: the Board would tell an applicant within 30 days whether their filing is substantially complete and identify missing information if it is not. The 120-day decision period runs from the submission date of a substantially complete application, during which time the Board must decide on approval or denial.