Fed Proposes Strict Reserve Requirements for US Stablecoin Issuers

The Federal Reserve has proposed two new rulemaking packages for payment stablecoin issuers under the GENIUS Act. Board-supervised issuers would have to fully back tokens with permitted reserve assets and meet standardized capital and risk-management requirements.

According to the proposals, Board-supervised payment stablecoin issuers would have to back their outstanding tokens fully with permitted reserve assets, such as short-term Treasury bills and other high-quality liquid assets. The Fed also wants standardized capital requirements aimed at covering credit and operational risks, alongside broader risk-management standards and rules for firms safeguarding stablecoin reserve assets.

The second proposal deals with the entry point for banks seeking to issue payment stablecoins. Board-supervised banks would have to submit an application including a business plan and financial information. The framework would also create formal processes for decisions, hearings, and appeals.

The Federal Reserve is seeking public comment on these proposals, with the 60-day comment period closing after publication in the Federal Register. Governor Michael Barr backed the direction of the proposal while emphasizing the need for clear redemption rights and strong safeguards.