Fed proposes GENIUS Act rules for stablecoin issuers

The Federal Reserve proposed capital, redemption and other requirements for stablecoin issuers under its supervision. The proposal sets an operational-risk capital charge of 2% on the first $20 billion in stablecoins outstanding. The charge would be 1.5% on the next $30 billion. It would be 1% on amounts above $50 billion. Issuers would also face capital requirements tied to credit and operational risks. Issuers would generally process redemptions within two business days. If reserves fell below one-to-one backing, an issuer would notify the Fed. The issuer would then restore its reserves under a remediation plan or liquidate them and redeem outstanding stablecoins. Issuers would publish monthly reports on their outstanding stablecoins. The reports would detail the value and composition of their reserves. A registered public accounting firm would examine the disclosures. The issuer's CEO and CFO would certify them. A separate proposal would create an application process for Fed-supervised banks seeking approval to issue payment stablecoins through subsidiaries. Applicants would submit a business plan and financial information. The proposals would remain 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. The law limits reserve assets to types including cash, bank deposits and short-term US Treasurys. Fed Governor Michael Barr supported the proposal on Thursday. Barr said stablecoins would be stable only if users could reliably and promptly redeem them at par in a range of conditions. Barr said reliable redemption must also apply during market stress. Barr said it must also apply during strain on an issuer or its related entities. Barr said he was encouraged by the proposed reserve-asset limits. He also supported standardized capital requirements. Barr called for public feedback on whether the framework addresses interest-rate and foreign-currency risks. Barr said universal redemption rights should be clearly established in the final rule. Barr raised concerns about a standard that would 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 set to take effect on Jan. 18, 2027, or 120 days after federal regulators issue final implementing rules, whichever comes first.