The Federal Reserve has proposed new rules for payment stablecoins under the GENIUS Act, setting strict requirements for reserve backing, capital standards, and risk management. The rules aim to ensure stablecoins remain reliable as payment instruments by tying their value to high-quality assets.
Reserve and Capital Requirements
The first proposal requires Fed-supervised payment stablecoin issuers to fully back their tokens with permitted reserve assets, including short-term US Treasury bills and other liquid investments. These assets must be sufficient to meet redemption requests, even during market stress.
Issuers will also face standardized capital requirements to address credit and operational risks tied to stablecoin activities. The Fed will apply additional risk-management rules to firms safeguarding assets backing stablecoins, clarifying how these activities align with existing banking supervision.
Federal Reserve Governor Michael Barr emphasized that stablecoins must allow prompt redemption at par value under all conditions, including financial strain. He supported the reserve restrictions and capital rules but called for feedback on whether the framework adequately covers interest-rate and foreign-currency risks.
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Barr also highlighted concerns about anti-money-laundering gaps in the developing regime, stressing that these must be addressed before final rules are adopted. The proposals mark a shift from broad statutory principles to detailed prudential oversight, requiring issuers to meet not only reserve requirements but also broader operational and governance standards.
Moreover, compliance could therefore involve not only maintaining sufficient reserves but also satisfying a wider set of FCA CP26/23 Consumer Duty Carve-Out, as reported by Lawyer Monthly, that covers capital adequacy, operational risk controls, custody safeguards and governance frameworks.
Banking and Approval Process
A second proposal outlines the approval process for Fed-supervised insured depository institutions seeking to establish subsidiaries that issue payment stablecoins. Applicants must submit a business plan, financial data, and supporting documents, with procedures for appeals and hearings on applications.
The proposals are not yet final. The Fed will accept public comments for 60 days after publication in the Federal Register, allowing stakeholders to shape the final regulations before adoption.
