Fed proposes capital and redemption rules for stablecoin issuers under GENIUS Act

The Federal Reserve has put out a proposal that would set capital, redemption and reporting rules for stablecoin issuers under its supervision as it starts implementing the GENIUS Act. For payment stablecoin businesses, the important part is not the headline policy language; it is the mechanics around reserves, redemptions and supervisory access.

1. The GENIUS Act already requires stablecoin issuers to back tokens on a one-to-one basis and limits reserve assets to cash, bank deposits and short-term US Treasurys. What the Fed proposal adds is the more detailed framework the law left to federal regulators: capital, reserve-diversification and risk-management requirements.
2. Under the proposal, issuers would face an operational-risk capital charge equal to 2% of the first $20 billion in stablecoins outstanding, 1.5% of the next $30 billion and 1% of amounts above $50 billion. The proposal also adds further capital requirements tied to credit and operational risks, which means the capital stack is not just about how much issuance sits on the balance sheet, but about how the issuer runs the business.
3. Redemptions would generally have to be processed within two business days. If reserves fall below the required one-to-one backing, the issuer would have to notify the Fed and either restore reserves under a remediation plan or liquidate them and redeem outstanding stablecoins. In practice, that is the part operators will care about most: it defines how quickly a reserve shortfall turns into a supervisory issue.
4. Issuers would also have to publish monthly reports on outstanding stablecoins and the value and composition of reserves. Those disclosures would need to be examined by a registered public accounting firm and certified by the issuer’s CEO and CFO, which makes reserve reporting look less like a marketing slide and more like an audited control environment.
5. A separate proposal would set an application process for Fed-supervised banks that want approval to issue payment stablecoins through subsidiaries. That application would require a business plan and financial information. The proposals are open for public comment for 60 days after publication in the Federal Register.

Fed Governor Michael Barr backed the proposal on Thursday, but said more work is needed before stablecoins can be treated as reliable payment instruments. He said stablecoins must be “reliably and promptly redeemed at par in a range of conditions,” including market stress and strain on the issuer or related entities. Barr also called for public feedback on whether the framework adequately 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 would limit Fed supervisory or enforcement action over an anti-money laundering deficiency unless the issue is considered “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.