The Federal Reserve has unveiled two proposals establishing a regulatory framework for payment stablecoin issuers under its supervision, advancing implementation of the GENIUS Act.
Released on September 24, the proposals would require supervised issuers to fully back their stablecoins with permissible reserve assets, while introducing standardized capital, risk-management and custody requirements. The Fed is also proposing a dedicated application process for supervised banks seeking to issue payment stablecoins.
Both proposals were unanimously approved for public comment by the Fed's seven-member Board of Governors.
The rules are part of the broader regulatory framework required by the GENIUS Act, which established the first federal regulatory regime specifically covering payment stablecoins.
Stablecoins Must Be Fully Backed
Under the first proposal, Fed-supervised issuers would need to maintain reserves equal to 100% of their outstanding payment stablecoins.
Eligible reserves would include assets such as short-term U.S. Treasury bills and certain other high-quality, liquid holdings, helping ensure issuers can meet redemption requests even during periods of financial stress.
The Fed would additionally establish standardized capital requirements designed to cover credit and operational risks associated with stablecoin businesses.
Risk-management standards would apply to issuers, while separate requirements would cover supervised companies responsible for safekeeping the reserve assets backing stablecoins.
The proposal would also clarify which stablecoin-related activities are permissible for banks supervised by the Federal Reserve.
Banks Get Dedicated Stablecoin Application Process
The second proposal focuses on banks that want to enter the stablecoin market.
Fed-supervised banks seeking approval to issue payment stablecoins through subsidiaries would receive a tailored application process. Applicants would need to provide regulators with a business plan, financial information and other required documentation.
The proposal would also establish formal procedures covering appeals, hearings and final regulatory decisions on stablecoin applications.
The Federal Reserve is not immediately finalizing either framework. The proposals are now open to public feedback, with the comment period closing 60 days after publication in the Federal Register.
Fed Focuses on Reliable Redemptions
Stablecoins have become critical infrastructure across cryptocurrency markets, providing blockchain-based tokens designed to maintain a stable value, usually against the U.S. dollar.
They are widely used for exchange settlement, crypto trading, cross-border transfers and moving funds without returning to traditional banking rails.
Federal Reserve Governor Michael Barr said effective regulation needs to ensure stablecoins remain redeemable at face value even during market stress.
Barr said he supports restrictions on reserve assets and transparent, standardized capital requirements, while noting that regulators should examine whether the proposed rules sufficiently address interest-rate and foreign-currency risks.
GENIUS Act Implementation Accelerates
The Fed's proposals form one part of a multi-agency effort to implement the GENIUS Act, rather than a standalone stablecoin regime.
Federal regulators have already proposed additional requirements covering areas such as customer identification and anti-money-laundering compliance for permitted payment stablecoin issuers.
The framework comes as stablecoins increasingly move beyond crypto trading and into payments, settlement and mainstream financial infrastructure.
For regulators, full reserve backing is intended to reduce the risk that an issuer cannot honor redemptions during periods of heavy withdrawals. Capital and risk-management requirements are designed to address operational problems that could emerge even when the underlying reserve assets remain safe.
For banks and stablecoin companies, the proposals provide more detail on what operating under the GENIUS Act could look like in practice.
The rules are still subject to public consultation and could change before becoming final. But the September proposals mark a significant step toward turning the GENIUS Act's statutory requirements into an operational federal stablecoin regulatory framework.
