Federal Reserve Proposes Regulations for Stablecoin Issuers and Bank Applicants

The Federal Reserve Board has introduced two proposals aimed at regulating supervised payment stablecoin issuers under the GENIUS Act. Firstly, the board wants issuers to fully back their tokens with permissible reserve assets such as short-term Treasury bills and other high-quality liquid assets. This includes standardized capital requirements to address credit and operational risks, as well as risk management standards. The proposal also aims to introduce rules for firms that safekeep assets backing payment stablecoins.

Secondly, the board is establishing a tailored application process for banks applying to issue payment stablecoins. Banks are expected to submit a business plan and financial information, among other documents. This process will govern appeals, hearings, and final determinations for applications.

The Federal Reserve Board is requesting public comments on the two proposals within 60 days after publication in the Federal Register. Major stablecoins and their issuers in the U.S. include Circle Internet's USDC, Tether (USDT-USD), Paxos' USDP, and PayPal (PYPL) PYUSD-USD.