Key Highlights
- The Federal Reserve proposed two rules on Thursday to establish oversight for payment stablecoin issuers under the GENIUS Act, opening a 60-day public comment period.
- The first proposal mandates full backing of stablecoins with approved reserve assets such as short-term U.S. Treasury bills and sets capital requirements for credit and operational risks.
- The second proposal outlines application procedures for Fed-supervised banks seeking to issue payment stablecoins, including business plan submissions, financial disclosures, and appeals processes.
Federal Reserve Unveils Dual Regulatory Framework for Stablecoin Oversight
The Federal Reserve announced two proposed rules Thursday aimed at establishing a comprehensive supervisory framework for payment stablecoin issuers operating under the Guiding and Establishing National Innovation for US Stablecoins ($GENIUS) Act. The proposals, published for public comment, represent the central bank’s most detailed regulatory action to date on dollar-denominated stablecoins since the legislation was signed into law by President Donald Trump on July 18, 2025. The public comment period will close 60 days after publication in the Federal Register, giving market participants, legal experts, and consumer advocates a structured window to shape the final rulemaking.
Reserve Asset Requirements and Capital Standards Detailed
The first proposal targets payment stablecoin issuers supervised by the Federal Reserve, requiring them to fully back their tokens with approved reserve assets. Eligible assets include short-term U.S. Treasury bills and other high-quality liquid assets, a design intended to ensure immediate redeemability even under severe market stress. Beyond asset composition, the rule sets explicit capital requirements for credit and operational risks and introduces risk management standards tailored to stablecoin activities. A companion provision addresses firms that hold assets backing stablecoins, clarifying which stablecoin-related activities are permissible for banks under Federal Reserve supervision.
Bank Application Process and Supervisory Clarifications
The second proposal focuses on the authorization pathway for Fed-supervised banks that wish to issue payment stablecoins. Applicant institutions must submit detailed business plans, financial information, and supporting documentation for review. The framework also establishes formal procedures for appeals and hearings related to application decisions, embedding due process into the supervisory architecture. Together, the two proposals create a dual-track regime: one governing the ongoing operational and financial integrity of stablecoin issuers, the other governing entry into the business by depository institutions.
Governor Barr Emphasizes Redemption Stability and Public Input
Federal Reserve Governor Michael Barr underscored the core objective of the rulemaking in a statement accompanying the release. He said stablecoins can only remain stable if users can quickly redeem them at full value. This should hold even during market stress or when the issuer and related companies face financial strain. He went on to add,
“I support the proposed rulemaking as a step in that direction within the framework provided by the $GENIUS Act, particularly as the rulemaking identifies key questions on which public feedback will be important. I am encouraged by provisions for reserve asset limitations, as well as transparent and standardized capital requirements. It will be useful to have public input on both of these aspects of the proposal, and in particular on whether the rule adequately addresses interest rate and foreign currency risks.”
Barr’s remarks highlight two areas where the Federal Reserve is explicitly seeking feedback: the calibration of reserve asset limitations and the design of capital requirements, with particular attention to interest rate and foreign currency risk exposures that could affect stablecoin stability.
Why This Matters
The Federal Reserve’s proposals arrive amid a rapidly converging regulatory landscape for stablecoins in the United States. The $GENIUS Act, enacted in July 2025, established the federal statutory framework, but implementation depends on coordinated rulemaking across multiple agencies. The Treasury Department last month issued proposed definitions covering who may issue U.S. stablecoins and which entities fall under the law’s compliance obligations. The Federal Deposit Insurance Corporation (FDIC) initiated its own regulatory process in December 2024, while several agencies in June 2025 proposed applying existing customer identification and verification requirements to stablecoin issuers. The Fed’s dual proposals now add the prudential supervisory layer—capital, liquidity, risk management, and entry standards—specifically for institutions under its jurisdiction. The 60-day comment period will be closely watched by issuers such as Circle and Tether, banking organizations evaluating stablecoin entry, and congressional overseers monitoring whether the regulatory architecture balances innovation with financial stability.
Frequently Asked Questions
What reserve assets are permitted under the Federal Reserve’s first proposal?
The proposal requires payment stablecoin issuers to fully back tokens with approved reserve assets, specifically short-term U.S. Treasury bills and other high-quality liquid assets.
Which institutions are covered by the two proposed rules?
The first proposal applies to payment stablecoin issuers supervised by the Federal Reserve and firms holding backing assets. The second proposal governs Fed-supervised banks that apply to issue payment stablecoins.
How long is the public comment period and when does it end?
The public comment period runs for 60 days after the proposals are published in the Federal Register; the exact closing date will be determined by the publication date.