The Federal Reserve’s proposed rules for the payment stablecoin issuers it supervises include a crisis clock measured in hours. An issuer whose reserves fall below the value of its outstanding tokens would have 24 hours to notify the Fed and submit a plan to restore full backing.
Unless it closes the gap or the Fed directs it to proceed with that plan, the issuer must begin liquidating reserves and redeeming tokens by 5 p.m. on the next business day. The Fed says that window comes to less than 48 hours in many cases.
The 392-page proposal also lets the issuer keep minting new tokens during that rescue window, and the Fed ties that choice to the public nature of blockchains. An abrupt halt in issuance would be visible on-chain and could tip holders off to the problem, speeding up the very run the rules exist to contain.
Comments are open for 60 days once the proposal appears in the Federal Register.
The clock starts at 5 p.m.
The proposal requires reserve assets to equal or exceed outstanding tokens at all times. Issuers must formally record the fair value of those reserves at least once a day at 5 p.m. in the time zone of their supervising Federal Reserve Bank.
The Fed says issuers operating close to the line may need to run that calculation several times a day. The breach clock starts at the beginning of liquidation, and finishing the process can take longer. Once liquidation begins, minting stops and redemption fees are prohibited.
A separate rule for ordinary conditions requires honoring redemption requests within two business days, a timeline that runs independently of the breach clock.
The Fed illustrates the logic with a $100 million stablecoin backed by $95 million in reserves. Split evenly, every holder could recover $0.95 per token. Once $35 million redeems at full par value, $60 million in assets remains against $65 million in tokens, leaving about $0.92 of backing for everyone who holds on.
Extending the same arithmetic, $50 million in par redemptions would leave $0.90 per token, and $80 million would leave $0.75. A fixed reserve hole grows larger per remaining token with every holder who exits at $1, which rewards the fastest redeemers at the expense of everyone behind them.
Forced liquidation is designed to push all holders toward the same pro-rata loss before that happens.
| Par redemptions before liquidation | Reserves remaining | Tokens remaining | Backing per remaining token |
|---|---|---|---|
| $0 | $95M | $100M | $0.95 |
| $10M | $85M | $90M | $0.94 |
| $35M | $60M | $65M | $0.92 |
| $50M | $45M | $50M | $0.90 |
| $80M | $15M | $20M | $0.75 |
Minting stablecoins keeps the rhythm visible, at a cost
Circle’s figures show how much routine issuance activity a large stablecoin generates. As of Sept. 21, USDC had $74.6 billion in circulation against $74.8 billion in reserves.
Over the prior 30 days, Circle issued $40.2 billion and redeemed $39 billion, a gross flow of $79.2 billion that exceeds the token’s entire supply even though net circulation grew by only $1.2 billion.
For a token with that kind of daily rhythm, a sudden stop in minting would stand out to anyone watching the chain.
Each fully funded new token spreads the existing hole across a larger supply, leaving its dollar size at $5 million. In the Fed’s example, $20 million of fresh issuance alongside the $35 million in redemptions would lift coverage to roughly $0.94, with the new buyers absorbing part of a loss that existed before they arrived.
Closing the hole itself requires new capital, recovery of an impaired asset or a rebound in reserve values, and genuine distress can leave few buyers willing to mint.
The proposal asks commenters directly whether issuance should be capped or prohibited the moment the 1:1 threshold is breached.
The OCC chose the opposite trade-off
The Office of the Comptroller of the Currency (OCC) proposed in March that an issuer under its supervision that falls below minimum reserves would have to stop net new issuance immediately, with a narrow exception for moving existing tokens across ledgers.
Mandatory liquidation would kick in only if the shortfall persisted for 15 consecutive business days, a period the OCC could extend. The Fed’s rules govern the issuers it supervises, while the OCC and state regulators oversee other issuers under the GENIUS Act, so the two approaches could run side by side.
The Fed’s December 2025 research on the March 2023 collapse of Silicon Valley Bank documents how these runs behave. Circle disclosed that $3.3 billion of USDC reserves, about 8% at the time, were trapped at the failed bank.
| After reserves fall below minimum | Federal Reserve proposal | OCC proposal |
|---|---|---|
| New issuance | May continue temporarily | Net new issuance stops immediately |
| Exception | Issuance remains available during remediation window | Tokens may be moved between ledgers if total outstanding issuance does not increase |
| Initial response | Notify Fed and submit remediation plan within 24 hours | Restore reserve compliance; new net issuance remains prohibited meanwhile |
| Liquidation trigger | By 5 p.m. the following business day after the plan deadline unless reserves are restored or Fed directs issuer to proceed with plan | After 15 consecutive business days below minimum reserves |
| Can regulator alter path? | Yes — Fed can direct issuer to proceed with remediation plan | Yes — OCC can extend the 15-business-day period |
| Core trade-off | Avoid making a sudden minting halt an on-chain distress signal | Stop an under-reserved issuer from expanding supply |
Redemptions surged, the primary redemption channel largely shut over the weekend with banking rails offline, and USDC fell as low as $0.86 on secondary markets. Trading volume on those markets hit nearly $2 billion in a single hour on March 11.
The researchers concluded that shutting an issuer’s redemption window leaves holders free to keep selling on exchanges, so the run moves venues and keeps going.
In the Fed’s view, visible redemptions can prompt more redemptions, while secondary-market trading can absorb selling that would otherwise hit the issuer as par redemptions and forced reserve sales.
Where a stablecoin run would travel next
CoinGecko’s survey of the 12 largest centralized exchanges found that 97.7% of stablecoin-denominated trading pairs use USDT or USDC, and most spot volume on those venues trades against stablecoins.
The total stablecoin market stands near $307.3 billion, with USDT at about $183.7 billion and USDC at $76.4 billion as of Sept. 25. Holders fleeing a distressed token could buy Bitcoin, lifting its price quoted in that stablecoin above its dollar price.
They could also exit into fiat or another stablecoin, thinning order books and widening spreads across pairs. Price gaps between Bitcoin’s different stablecoin pairs, order book depth, and funding rates would show which path a run was taking.
The GENIUS Act steers reserves toward Treasuries maturing within 93 days and qualifying repo arrangements, and the Fed acknowledges that a large enough Treasury position could be hard to sell in full without moving prices.
An IMF model from January lays out the timing mismatch between stablecoin holders, who can redeem around the clock, and bond and repo markets, which close overnight and on weekends.
A large redemption wave can drain cash buffers and force bond sales as soon as those markets reopen.
| What holders do | First market affected | What to watch | Potential next consequence |
|---|---|---|---|
| Redeem directly for dollars | Issuer reserves | Redemption volume; reserve coverage | Forced Treasury/repo liquidation |
| Sell for another stablecoin | Stablecoin exchanges/DEXs | USDC/USDT or distressed-token spreads | Liquidity concentrates in surviving stablecoins |
| Buy Bitcoin or other crypto | Crypto spot markets | BTC price across different stablecoin pairs | Apparent BTC premium in the weakening stablecoin |
| Sell into fiat | Exchange order books/banking rails | Market depth and bid-ask spreads | Crypto-native dollar liquidity contracts |
| Keep selling while banking rails are closed | Secondary crypto markets | Stablecoin discount; weekend volume | Run continues even when primary redemption slows |
| Issuer sells reserves when markets reopen | Treasuries/repo | Short-term yields, reserve sales | Crypto liquidity shock reaches traditional markets |
If an issuer closes its hole inside the first 24 hours, the episode could pass as a brief dislocation, with minting and redemption resuming their normal rhythm and the Fed’s compressed clock working as designed.
A breach that lands late on a Friday, with redemptions and a secondary-market discount feeding each other before the 5 p.m. cutoff, would play out very differently. Each exit at par would thin the backing for the holders who remain, and the scramble would spread into exchange order books.
The issuer’s Treasury holdings would wait for Monday’s open while its tokens trade all weekend.
The Fed has drafted a run rule for a market where everyone can watch the run in real time. Over the 60-day comment period, regulators will weigh that visibility against the speed they want from a rescue.
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