Fed proposes reserve, redemption and yield rules for stablecoin issuers it would supervise

The Federal Reserve Board asked for public comment on Sept. 24 on two GENIUS Act proposals: reserve, capital, redemption and yield rules for the stablecoin issuers it would supervise, and an application process for Fed-supervised banks that want a subsidiary to issue stablecoins. Comment on each closes 60 days after Federal Register publication.

Key points

• The Fed's press release, for release at 2:30 p.m. EDT on Sept. 24, describes two proposals. The first, in a notice at Docket R-1899, would require Board-supervised issuers to back their stablecoins in full with reserves of permitted assets, for example short-term Treasury bills, and would set capital and risk-management standards for them. The second, in a separate notice at Docket R-1900, would set a tailored application process for insured state member banks that seek Board approval for a subsidiary to issue stablecoins. As posted on Sept. 24, each notice still has a bracketed placeholder where its closing date would go, so no date is given here.
• The scope is one agency's slice. The R-1899 notice's definition of a Board-supervised issuer includes subsidiaries of insured state member banks that the Board has approved to issue stablecoins, and uninsured state-chartered issuers that have moved to the Board's framework under section 4(d) of the Act. The notice calls itself one piece of the Act's implementing regulations, and other agencies have their own proposals for the issuers they oversee. A Board staff memo dated Sept. 3 puts the Act's effective date at whichever comes first: Jan. 18, 2027, or 120 days after the primary federal stablecoin regulators issue any final implementing rules.
• Reserves. Under proposed section 247.11 in the notice, an issuer's reserve assets would have to be identifiable, kept separate from its other assets, and at all times have a total fair value at least equal to the par value of its outstanding stablecoins. The permitted assets would be exclusively: US currency and Federal Reserve Bank balances; eligible deposits at insured banks and credit unions, subject to any FDIC or NCUA limits; Treasury bills, notes or bonds with 93 days or less remaining to maturity; certain overnight repurchase and reverse repurchase agreements involving Treasuries; registered funds, including government money market funds, that invest only in those assets; other similarly liquid federal government-issued assets the Board approves; and tokenized forms of several of these, if the token carries legal rights identical to the ordinary form.
• Redemption. The notice would require an issuer to redeem a stablecoin within two business days of the requested redemption date, which it describes as an outer limit; an issuer could choose a shorter time. The Board could extend it on finding a threat to the issuer's safety and soundness or to financial stability, or that an extension serves the public interest. Safe harbors would cover delays needed for customer identification and due-diligence checks, or delays outside the issuer's control, if the issuer shows the Board the delay qualifies and that it made all reasonable efforts to resolve it. In the notice's preamble, circumstances outside an issuer's control do not include a delay caused only by more redemption requests than the issuer expected.
• Capital. Minimum capital in the notice is a sum of components, including a 2% requirement for uninsured deposits held as reserves, a 2% requirement for the undercollateralized part of reverse repurchase agreements, and an operational-risk requirement that grows with the amount of stablecoins outstanding. An issuer below its minimum at quarter-end would file a capital plan within five business days; if it were still short at the end of the following quarter, it would have to begin liquidating reserves and redeeming outstanding stablecoins the next day, with no redemption fee and no new issuance.
• Yield. Under proposed section 247.10(c)(4), the notice would bar an issuer from paying a holder interest or yield, in cash, tokens or other consideration, solely for holding, using or retaining a stablecoin. The Board says it follows the approach in the OCC's own GENIUS Act proposal, which its notice cites to the Federal Register of March 2, 2026, and would presume an issuer is paying yield through a partner when two things are true: the issuer has an arrangement to pay interest or yield to an affiliate or related third party, and that party has an arrangement to pay yield to holders of the issuer's stablecoin solely for holding, using or retaining it. The issuer could rebut the presumption in writing. Other arrangements would be judged case by case, and the notice says the ban is not aimed at a merchant that independently offers a discount for paying with stablecoins, or at an issuer sharing profits with a white-label partner that is not its affiliate.
• Governor Michael Barr's same-day statement says Barr supports the proposal as a step within the framework the GENIUS Act provides. The statement says stability depends on coins being "reliably and promptly redeemed at par" under varying conditions, and calls it important for the final rule to be clear about universal redemption rights, which it ties to public confidence that people can reach their money. It also says public input would be useful, in particular on whether the proposal deals adequately with interest-rate and foreign-currency risk.
• Barr raised one concern about the notice's anti-money-laundering policy. Under it, an issuer that has properly set up an anti-money-laundering and countering-the-financing-of-terrorism (AML/CFT) program would not face an AML/CFT enforcement action or a significant AML/CFT supervisory action over FinCEN's program requirements, unless it had a significant or systemic failure to carry the program out. The notice leaves the Board free to act on a failure to properly establish a program, and does not affect criminal enforcement under the Bank Secrecy Act. Barr said the standard should be addressed in any final rule, and that it may affect, in ways not yet known, how well the Board can show that an institution keeps compliant programs.

Why it matters

Saying a stablecoin is fully backed leaves open what the backing is, how fast a coin can be turned back into dollars, how much capital absorbs a loss and what happens when that capital runs short. The Fed's notice puts specifics on each of those for the issuers it would supervise, and the specifics are proposals: other agencies have their own proposals for the issuers they oversee, and a proposal is not a final rule. The yield section reaches beyond an issuer's own payments, because the presumption covers arrangements with affiliates and related third parties. The notice says arrangements outside the presumption would be judged case by case, so the presumption does not cover every arrangement the ban could reach. This summary does not rate any particular stablecoin or weigh whether holding one makes sense; it reports what a regulator has proposed and where to read it.

This is an AI-written summary of the sources credited above and linked in the text, read and edited by Nicholas before publishing. The facts and any quote belong to those sources; the wording is ours. Read the original.