The Federal Reserve has published two proposals aimed at putting more detailed guardrails around stablecoin issuers as the U.S. implements the GENIUS Act. The plan, developed for entities under Fed supervision, would add capital requirements, define operational-risk charges, tighten redemption expectations, and mandate standardized reserve reporting—while also outlining an approval path for certain banks to issue payment stablecoins through subsidiaries.
At the same time, Fed Governor Michael Barr signaled support for the overall direction but emphasized that stablecoins must remain reliably redeemable at par even under market stress. His remarks point to the central test investors and users will apply to the final rules: will redemption work smoothly when liquidity tightens and even high-quality government debt trades under strain?
Key takeaways
- The Fed’s proposal adds an operational-risk capital framework for Fed-supervised stablecoin issuers, with charges that vary based on the amount of stablecoins outstanding.
- Redemptions would generally need to be processed within two business days, and issuers would face defined steps if reserves fall below the one-to-one backing requirement.
- Issuers would be required to publish monthly reserve and outstanding stablecoin disclosures, certified by senior executives and audited by a registered public accounting firm.
- A separate proposal would set an application process for Fed-supervised banks to seek approval to issue payment stablecoins through subsidiaries.
- Barr backed the direction of the framework but urged additional clarity on how stability is ensured during stress, including interest-rate and foreign-currency risks.
How the GENIUS Act shapes the Fed’s stablecoin rulemaking
The GENIUS Act already contains baseline requirements for stablecoin issuers: tokens must be backed by reserves on a one-to-one basis, and issuers are limited in the types of assets they can hold. In particular, the statute restricts reserves to certain categories including cash, bank deposits, and short-term U.S. Treasurys, while leaving regulators to build out more granular capital, diversification, and risk-management standards.
According to the Fed’s proposal, the missing piece is the operational and supervisory detail: how much capital issuers must hold against specific risks, what redemption timelines must be met, and how often issuers must document and verify that reserves remain adequate.
Capital charges, redemption timelines, and what happens if backing slips
Under the Fed proposal, issuers would face an operational-risk capital charge calculated as a percentage of the stablecoins they have issued. The rate would step down as outstanding amounts increase: 2% for the first $20 billion of stablecoins outstanding, 1.5% for the next $30 billion, and 1% for amounts above $50 billion. The proposal also references additional capital requirements tied to credit and operational risks.
The rules would also establish a practical expectation for redemption operations. In general, Fed-supervised issuers would be expected to process redemptions within two business days.
Importantly, the proposal addresses a key failure scenario: if an issuer’s reserves fall below the required one-to-one backing, it would have to notify the Fed and choose between two paths—either restore reserves according to a remediation plan or liquidate reserves and redeem outstanding stablecoins.
For investors and market participants, this structure matters because it translates a statutory “always backed” principle into an operational consequence framework. Instead of only requiring reserve sufficiency after the fact, the proposal attempts to specify how quickly an issuer must act and what supervisory information will be available.
Monthly transparency with audited reporting
To reinforce the reserve-backstopping requirement, the Fed proposal would require issuers to publish monthly reports. These disclosures would cover the outstanding amount of stablecoins and the value and composition of reserves.
The proposal also sets a higher standard for accountability around that data: the disclosures would need to be examined by a registered public accounting firm and certified by the issuer’s CEO and CFO.
That combination—frequent reporting, third-party review, and executive certification—can be significant for traders, partners, and users trying to assess whether a stablecoin remains compliant as market conditions evolve. It also increases the importance of internal controls at issuers, since executive sign-off implies direct responsibility for the quality and accuracy of reserve information.
Separate track for Fed-supervised banks issuing through subsidiaries
Alongside issuer-focused requirements, the Fed released a separate proposal that would establish an application process for Fed-supervised banks seeking approval to issue payment stablecoins through subsidiaries.
Per the proposal, banks would need to submit a business plan and provide financial information as part of the approval process. While the GENIUS Act sets the statutory groundwork, this track would determine whether banks—under Fed supervision—can bring certain stablecoin issuance activities under a subsidiary structure and how they would be evaluated before launch.
For the broader industry, the distinction matters: approval frameworks can affect timing, product design, and risk management choices for banks looking to participate in stablecoin markets.
Barr stresses redemption reliability under stress and highlights open questions
In remarks accompanying the proposals, Fed Governor Michael Barr supported the overall direction but argued that more work is needed before stablecoins can qualify as reliable payment instruments. In a statement released Thursday, Barr said stablecoins will only be stable if they can be “reliably and promptly redeemed at par in a range of conditions,” explicitly including periods of market stress.
Barr’s commentary focused on scenarios where liquidity strains can affect even otherwise liquid government debt, as well as episodes where an issuer—or related entities—faces pressure. He said he was encouraged by the proposed limits on reserve assets and the standardized capital requirements, but he also called for public feedback on whether the framework adequately addresses interest-rate and foreign-currency risks.
Barr also raised process-and-enforcement considerations. He said universal redemption rights should be clearly established in the final rule. He further expressed concern about a proposed standard that would limit the Fed’s ability to take supervisory or enforcement action over an anti-money laundering deficiency unless the issue is deemed “significant or systemic.”
These points suggest that while the Fed is moving to operationalize the GENIUS Act, the “stress test” details—particularly around interest-rate, FX, redemption rights, and supervisory triggers—may still evolve through the comment period.
What happens next
The Fed’s proposals are open for public comment for 60 days after publication in the Federal Register. With the GENIUS Act scheduled to take effect on Jan. 18, 2027, or 120 days after final implementing rules are issued—whichever comes first—the key question for market participants is how the final rule will address Barr’s concerns and refine redemption reliability, capital adequacy, and stress-related risks.
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