Federal Reserve Unveils Bank-Grade Stablecoin Framework Under GENIUS Act

The Federal Reserve has introduced two proposed rules to implement the GENIUS Act stablecoin framework for state member banks. The first rule focuses on reserve backing, reporting, and capital requirements for Fed-supervised Permitted Payment Stablecoin Issuers (PPSIs). It mandates a 1:1 reserve backing with high-quality, liquid assets like U.S. currency and Treasury bills, while banning rehypothecation and imposing tailored capital requirements. The second rule outlines a streamlined application process for insured state member banks issuing stablecoins through a subsidiary, with a 120-day approval window for qualifying applicants.

These Notices of Proposed Rulemaking (NPRMs) are part of a broader effort by three federal agencies to construct a synchronized regulatory architecture for the U.S. stablecoins market. The Treasury is establishing issuance standards, while the SEC is governing the offering process. All three agencies have parallel comment deadlines, with the Treasury and SEC deadlines falling on October 19 and October 20, respectively, and the Fed’s deadline set for November 30.

The regulatory landscape is further complicated by the recent departure of SEC Commissioner Hester Peirce, leaving only two commissioners to oversee the agency’s crypto framework. This creates a quorum risk, as any regulatory action now requires unanimous agreement. In contrast, the Fed’s approach is more mechanical and bank-centric, aiming to create a highly exclusive, bank-dominated stablecoin issuance environment.

With only 703 insured state member banks under Fed supervision and estimates suggesting that only 5 to 10 will seek PPSI subsidiary approval, the regulatory barrier to entry is intentionally high. The Fed’s framework signals a future where stablecoins are treated as bank-grade liabilities rather than experimental digital assets. This aligns with the broader trend toward on-chain institutional finance, ensuring that the system is operationally robust by the January 18, 2027, effective date.