Fed Unveils Proposed GENIUS Act Framework for Supervised Stablecoin Issuers

The Federal Reserve has released proposed rules that would impose capital, redemption and disclosure requirements on stablecoin issuers under its supervision, as implementation of the GENIUS Act moves forward. Under the proposal, issuers would face an operational-risk capital charge that scales with the amount of stablecoins outstanding: 2% on the first $20 billion, 1.5% on the next $30 billion, and 1% on balances above $50 billion. Additional capital requirements would also apply based on credit and operational risks. The Fed would generally expect issuers to process redemptions within two business days. If reserves were to fall below one-to-one backing, the issuer would be required to notify the Fed and then either restore reserves under a remediation plan or liquidate reserves and redeem outstanding stablecoins. Issuers would publish monthly reports detailing the value and composition of their reserves. Those disclosures would be examined by a registered public accounting firm and certified by the issuer's CEO and CFO. In a separate proposal, the Fed outlined an application process for Fed-supervised banks seeking approval to issue payment stablecoins through subsidiaries, requiring applicants to submit a business plan and financial information. Both proposals would be open for public comment for 60 days after publication in the Federal Register. The GENIUS Act requires issuers to maintain one-to-one reserves backing their tokens and limits eligible reserve assets to categories such as cash, bank deposits and short-term U.S. Treasurys. Fed Governor Michael Barr said Thursday he supported the proposal, arguing stablecoins can be considered stable only if users can reliably and promptly redeem them at par across a range of conditions, including market stress and periods of strain at an issuer or related entities. Barr said he was encouraged by the proposed limits on reserve assets and supported standardized capital requirements. Barr also called for feedback on whether the framework sufficiently addresses interest-rate and foreign-currency risks, and said universal redemption rights should be clearly established in the final rule. He raised concerns about a standard that could prevent the Fed from taking supervisory or enforcement action over an anti-money-laundering deficiency unless the issue is significant or systemic. The GENIUS Act is scheduled to take effect on Jan. 18, 2027, or 120 days after federal regulators issue final implementing rules, whichever comes first.