The Fed drafts its rules for bank stablecoin issuers

The Federal Reserve Board has asked for public comment on two proposals that would establish its regulatory framework for the payment stablecoin issuers it supervises under the GENIUS Act. Comments will be accepted for 60 days after publication in the Federal Register.

The first proposal carries the substance. Board-supervised issuers would have to back their stablecoins fully with permissible reserve assets, such as short-term Treasury bills and certain other high-quality liquid assets. It adds standardised capital requirements for credit and operational risks, risk-management standards, rules for Board-supervised firms that safekeep reserve assets, and clarification of which stablecoin activities Board-supervised banks may undertake. The second proposal sets a tailored application process for banks that want to issue, with a business plan and financial information among the required documents and a process for appeals, hearings and final determinations.

Barr's conditions

Governor Michael Barr supported the proposals in a statement published alongside them, but framed his support around conditions. Stablecoins, he wrote, will only be stable if they can be redeemed at par reliably and promptly, including in market stress, when even liquid government debt can come under pressure. He welcomed the limits on reserve assets and the standardised capital requirements, asked for public input on whether interest-rate and foreign-currency risks are adequately covered, and said universal redemption rights must be clear in the final rule.

His sharpest point concerned money laundering. Barr wants any final rule to address a standard that would bar the Board from supervisory or enforcement action over an anti-money-laundering deficiency unless it is 'significant or systemic', which he warned may have unknown effects on the Board's ability to verify that institutions maintain compliant programmes. He called the proposals an important step and said further work will be needed if stablecoins are to be reliable payment instruments.