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

The Federal Reserve has proposed new capital, redemption and regulatory requirements for stablecoin issuers under its supervision as it implements the GENIUS Act. The GENIUS Act requires stablecoin issuers to maintain one-to-one reserve backing for their tokens and restricts the types of assets they can hold. The Fed's proposal includes an operational-risk capital charge based on the amount of stablecoins outstanding, and additional capital requirements tied to credit and operational risks.

Issuers would need to process redemptions within two business days, and if reserves fall below the one-to-one backing, they would have to notify the Federal Reserve and either restore reserves or liquidate stablecoins. The issuers would also need to publish monthly reports detailing their stablecoin holdings and reserve composition.

The proposals are open for public comment for 60 days. Fed Governor Michael Barr expressed support for the proposal but called for further work to ensure stablecoins can be reliable payment instruments, particularly during market stress or issuer-specific issues. The GENIUS Act is set to take effect on January 18, 2027, or 120 days after final implementing rules are issued, whichever comes first.