Fed Slams Brakes on Stablecoins with Strict Reserve Requirements
The Federal Reserve has proposed two rulemakings that would impose strict requirements on payment stablecoin issuers and supervised banks. Under the proposals, issuers would need to hold reserve assets with a fair value at least equal to the par value of outstanding stablecoins. Eligible reserves include U.S. dollar cash, Federal Reserve balances, certain insured deposits, short-term Treasury securities, qualifying repurchase agreements, eligible investment funds, and some tokenized versions of those assets.
Issuers would also be required to offer redemption within two business days, and capital requirements would include a 2% charge on certain uninsured deposit claims and undercollateralized reverse repurchase agreements. Operational-risk charges would decline from 2% to 1.5% and then 1% as outstanding stablecoin volume rises through the specified tiers.
Banks seeking to issue payment stablecoins through subsidiaries would need to submit business plans, financial information, and other materials under a tailored approval process. Federal Reserve Governor Michael S. Barr emphasized that stablecoins will only be stable if they can be reliably and promptly redeemed at par.