By What Would the Fed Require From Stablecoin Issuers?
The Federal Reserve has proposed a detailed rulebook for stablecoin issuers under its supervision, setting out reserve, capital, redemption and risk-management requirements as the U.S. moves closer to putting the GENIUS Act into operation.
The proposal would require Board-supervised payment stablecoin issuers to maintain one-to-one backing at all times using a narrow set of liquid assets. Permitted reserves would include U.S. dollars, Federal Reserve balances, demand deposits at insured banks, Treasury securities with 93 days or less remaining to maturity and certain overnight repurchase transactions backed by Treasuries.
Reserve assets would have to be segregated from the issuer’s other assets. The Fed would also require diversification intended to reduce concentration risk where issuers rely heavily on uninsured bank deposits or a small number of repo counterparties.
The move comes after U.S. regulators missed the GENIUS Act’s July 18 deadline for final implementing rules. The law is expected to take effect on January 18, 2027, unless final regulations trigger an earlier effective date.
What Would the Fed’s Capital Rules Mean for Issuers?
The proposal goes beyond requiring stablecoins to be fully backed. It would impose standardized capital charges intended to absorb operational and credit risks that sit outside the reserve itself.
For reserve assets held as uninsured deposits or undercollateralized reverse repos, the proposed capital requirement would be 2%. Operational-risk capital would be graduated according to stablecoins outstanding: 2% on the first $20 billion, 1.5% on the next $30 billion and 1% on amounts above $50 billion.
Issuers would also face a separate charge tied to revenue from non-reserve activities. Failure to meet minimum capital requirements at the end of a quarter would trigger a remediation plan. If the shortfall remained at the end of the following quarter, the issuer could be required to liquidate its reserves and redeem outstanding stablecoins.
The rule would also require redemption policies with a normal maximum period of two business days, along with weekly reporting covering issuance, redemptions, trading volume and reserves.
Investor Takeaway
The Fed proposal turns the GENIUS Act’s broad promise of one-to-one backing into a much more detailed operating framework. For issuers, the competitive question is no longer only whether reserves are safe, but how expensive the required capital, liquidity, reporting and compliance structure becomes at scale.
Could the Rules Change the Stablecoin Reserve Business?
The reserve limits reinforce a regulatory preference for cash, bank deposits and very short-dated government debt. That could push regulated stablecoin growth deeper into the Treasury market while making assets such as bitcoin, gold, longer-duration securities and corporate credit unsuitable as direct reserve backing for Fed-supervised issuers.
That distinction is already relevant to offshore issuers. FinanceFeeds previously found that roughly $47 billion, or about a quarter, of Tether’s disclosed reserve portfolio would not qualify under GENIUS reserve standards, even though most of its backing is already concentrated in Treasury bills and other dollar assets.
Banks and asset managers are also building products around the new rules. State Street launched a government money market fund this year aimed specifically at stablecoin reserve management, an example of how compliance could create a new institutional business around holding and servicing digital-dollar reserves.
The Fed separately proposed an application process for state member banks seeking approval for subsidiaries to issue stablecoins. Applicants would need to submit a business plan, financial information, capital documentation, policies and procedures and management information.
Why Is Michael Barr Still Concerned About AML Enforcement?
Federal Reserve Governor Michael Barr supported the proposal, pointing to its reserve limits and standardized capital requirements, but said he still wants changes to the treatment of anti-money-laundering deficiencies.
The proposal would generally require an AML deficiency to be “significant or systemic” before the Board could take supervisory or enforcement action against a payment stablecoin issuer. Barr said he was concerned that standard could have “unknown effects” on the Fed’s ability to establish that an institution maintains compliant programs.
The AML debate sits alongside a wider set of GENIUS Act rules still moving through federal agencies. Treasury has proposed rules covering domestic issuance and foreign stablecoins, while earlier interagency work addressed customer-identification requirements.
That leaves the industry with a clearer picture of the intended regulatory framework, but not yet a final rulebook. With the January 2027 effective date approaching, the next question is how much the Fed changes its proposals after the 60-day public-comment period and how quickly banks and stablecoin issuers adapt before the law becomes operational.