Fed proposes reserve limits and capital standards for stablecoin issuers under GENIUS Act

The Federal Reserve proposed new measures for stablecoin issuers under the GENIUS Act. The proposal would require payment stablecoin issuers to fully back their stablecoins with short-term Treasury bills or other highly liquid assets. The proposal would create standardized capital requirements and risk-management standards. The proposal would create a specific application process for board-supervised banks that want to issue payment stablecoins. The GENIUS Act creates a federal regulatory framework for stablecoins. The law requires stablecoins to be fully backed by U.S. dollars or similarly liquid assets. The law also requires mandatory annual audits. Agencies initially faced a July deadline to implement the law. The GENIUS Act has a January 2027 effective date. Federal Reserve Governor Michael Barr supported the proposal but wanted more action on bank anti-money-laundering controls. Barr said he wanted a standard that would prevent the Board from taking supervisory or enforcement action over an anti-money-laundering deficiency unless the issue was significant or systemic. Barr said that standard may have unknown effects on the Board's ability to establish that an institution maintains compliant programs.