Fed proposes two stablecoin rules under the GENIUS Act

The Federal Reserve Board proposed two rules on 24 September to implement the GENIUS Act for payment stablecoin issuers, and is seeking public comment¹. The proposals would impose full reserve backing, capital charges and risk-management standards on payment stablecoin issuers and supervised banks². The Board has requested public comment on both¹⁰.

The first proposal would require Board-supervised payment stablecoin issuers to hold reserve assets against their tokens⁹. The second would require Fed-supervised banks to seek approval to issue payment stablecoins through subsidiaries, and also sets out redemption rules⁴. With Congress stalled, the Board opened a 90-day comment period on the reserve requirement⁸.

The capital charge

The rule as proposed would set a capital requirement of about US$20 million for US$1 billion of stablecoins⁶. It would separate that capital requirement from the maintenance of reserve backing, so the two obligations run in parallel rather than one substituting for the other⁶. It would apply to issuers under the central bank’s supervision⁶.

Fed Governor Michael Barr, who has criticised the GENIUS Act’s guardrails before, backed the direction of the proposal but pushed for one change^4,5. One analysis of the framework as written concluded that Wall Street banks come out ahead under it⁵. The bank application process is the gate: supervised institutions would have to seek approval before issuing at all³. The change Barr sought was not specified in the reporting⁵.

What to watch

The mechanics carry a stress scenario that the proposals themselves create. One analysis warned the proposed rule could trigger a 48-hour liquidation run, because the Fed would give stablecoin issuers 24 hours to restore full backing before a forced liquidation wave begins⁷. The transmission runs through issuers’ Treasury positions, which is where a forced sale would land⁷. A 24-hour cure window is short relative to settlement in the assets issuers hold, which is why the analysis framed the risk as a forced sale rather than a slow markdown⁷.

Three things follow for investors. The comment period is the immediate step, and the Board is seeking views on both proposals rather than presenting a final rule^1,10. The approval process will determine which supervised banks can issue, and through what structure^3,4. And the fit between the Board’s rules and the Treasury’s own implementation of the GENIUS Act, which officials have framed in terms of dollar dominance, is not yet settled³. Capital costs tied to circulation are the number issuers will model first⁶.