The Federal Reserve has proposed a two-business-day limit for payment stablecoin redemptions by issuers under its supervision, adding new detail to the developing U.S. regulatory framework for dollar-backed tokens.
Published in the Federal Register on September 29 following the Board's September 24 announcement, the proposal would require a Board-supervised payment stablecoin issuer to clearly disclose its redemption policies and procedures. The requirements are not yet final and remain open for public comment.
Under proposed Section 247.12, the issuer's standard redemption period could not exceed two business days after receiving a valid request.
However, the rule applies specifically to qualifying requests submitted to supervised issuers. It does not necessarily mean every retail stablecoin holder would be able to convert tokens held on a crypto exchange into dollars within two days.
Where the Two-Day Clock Starts
Under the proposal, stablecoin issuers would need to explain how eligible customers can redeem tokens and generally accept redemption requests involving at least one payment stablecoin, subject to applicable onboarding and compliance requirements.
The Fed would retain authority to extend the redemption period when necessary for reasons involving financial stability, safety and soundness or the public interest.
The framework also provides limited protections for issuers when delays result from legally required customer screening, compliance procedures or circumstances beyond the issuer's reasonable control.
These exceptions are important because the proposed two-day period governs the issuer side of a qualifying redemption, rather than every transaction involving a stablecoin.
Exchange Customers Face an Additional Step
That distinction becomes particularly significant for customers holding stablecoins on centralized cryptocurrency exchanges.
Researchers at the Andersen Institute for Finance and Economics estimated that approximately $76 billion of stablecoins were held on centralized exchanges in a July 28 snapshot covering 12 reserve-backed dollar stablecoins. The researchers described that amount as a lower-bound estimate because not every exchange-controlled wallet can be identified.
For those customers, requesting a withdrawal, sale or conversion from an exchange is a separate transaction between the customer and the trading platform.
Only after an exchange makes a qualifying redemption request to a supervised stablecoin issuer would the issuer's regulatory redemption requirements become directly relevant.
Consequently, the Fed proposal should not be interpreted as guaranteeing that every exchange customer receives dollars within two business days.
USDC Shows How Direct Redemption Can Differ
Existing arrangements around Circle's USDC demonstrate how the distinction works in practice.
Circle's current terms state that eligible customers outside the European Economic Area can directly redeem USDC if they maintain a Circle Mint account in good standing. Circle describes Mint primarily as infrastructure serving institutional customers and distributors rather than unrestricted retail redemption infrastructure.
Someone holding USDC through an exchange may therefore interact with that exchange rather than directly with Circle.
Coinbase's U.S. user agreement similarly states that customers own the USDC held in their wallets, but Coinbase is not obligated to repurchase USDC for U.S. dollars. The company may facilitate conversions while directing direct issuer redemptions toward Circle under Circle's separate eligibility requirements.
Coinbase also retains rights under its agreement to restrict or suspend certain transactions under specified circumstances.
Redemption Rules Become Part of Stablecoin Framework
The proposal forms part of the Fed's broader effort to implement federal requirements for supervised payment stablecoin issuers.
Alongside redemption standards, the framework addresses areas including reserve assets, capital, risk management, custody and disclosure requirements. The objective is to ensure regulated stablecoins remain backed by sufficiently liquid assets and can meet valid redemption requests reliably.
The proposed two-day requirement adds an important consumer-facing element by establishing a maximum normal redemption period at the issuer level.
But the distinction between issuer redemption and exchange withdrawal remains critical. A supervised issuer could comply fully with the proposed two-business-day rule while a customer holding stablecoins through an intermediary still faces separate processing times, eligibility requirements or restrictions imposed by that platform.
As the Fed collects public comments, those differences between stablecoin issuers, exchanges and end users are likely to remain central to how redemption protections operate in practice.
