Fed Stablecoins Must Be Redeemable at Par Across All Conditions

The Federal Reserve has proposed regulations for bank-supervised stablecoin issuers, focusing on redeeming digital dollars into cash. The proposal applies to a narrow group of issuers under the Board's supervision.

Governor Michael Barr emphasized that prompt redemption is crucial during market stress and strain. A reserve is not enough; it must be liquid, easily accessible, and protected from operational losses or outages.

The proposals address reserve assets, capital, custody, and approvals for issuers. They also highlight the need for clear universal redemption rights in the final framework.