The US Federal Reserve has unveiled a comprehensive set of proposed regulations for dollar-backed stablecoin issuers, marking a significant advancement in the implementation of the GENIUS Act. The new framework aims to establish federal oversight for digital-asset payments by mandating that supervised issuers maintain full reserve backing for their tokens, primarily through high-quality, liquid assets such as short-term US Treasury bills.
The GENIUS Act restricts payment stablecoin issuers from rehypothecating reserve collateral, except to generate liquidity for reasonable redemption expectations. Prior to this, New York's Department of Financial Services issued guidance requiring trust companies to hold approved reserve assets and maintain full backing.
Reserve and Capital Standards
Under the proposed rules, payment stablecoin issuers supervised by the Federal Reserve must ensure their tokens are fully collateralized. This requirement is intended to safeguard the value of stablecoins against market volatility. Beyond reserve backing, the Fed has introduced standardized capital requirements designed to mitigate credit and operational risks inherent in stablecoin issuance. Supervised firms will also be subject to rigorous risk-management standards governing their digital-asset operations.
For OCC-regulated-bank payment stablecoin issuers or their subsidiaries, all stablecoin reserve assets were assumed to count toward the leverage requirement. Additionally, provisions concerning reserve asset limitations and transparent capital standards have drawn positive remarks regarding whether the rule adequately addresses foreign currency and interest rate risks.
Oversight for Custodial Banks
The proposed framework extends its reach to Fed-supervised banks that provide custody services for stablecoin reserves. These rules clarify the permissible activities for banks involved in the digital-asset ecosystem and set specific requirements for institutions safeguarding the assets that back stablecoin tokens. By formalizing these standards, the Fed seeks to integrate stablecoin activities into the broader, regulated banking infrastructure.
Application Process for Bank Issuers
In addition to regulating existing issuers, the Fed has outlined a formal application process for Board-supervised banks that intend to issue their own payment stablecoins. Applicants are required to submit detailed business plans and financial disclosures. The proposal establishes a structured timeline for this process, including procedures for appeals, hearings, and final regulatory decisions. The Federal Reserve has committed to informing applicants of their application status within 30 days of submission, with a 120-day window for a final decision once an application is deemed substantially complete.
Public Consultation Phase
The Federal Reserve has opened a 60-day public comment period following the publication of these proposals in the Federal Register. This period allows industry stakeholders and the public to provide feedback on the operational guidelines before the rules are finalized. The initiative represents a critical step in defining the federal regulatory landscape for stablecoins, as mandated by the GENIUS Act passed last year.
