Federal Reserve Proposes GENIUS Act Rules for Stablecoin Issuers and Bank Applications
The two proposals would set reserve, capital, risk-management and safekeeping requirements and create an application process for supervised banks seeking issuer subsidiaries.
The Federal Reserve requested comment on two GENIUS Act proposals on September 24. One would establish operating rules for payment-stablecoin issuers supervised by the Board; the other would create an application process for insured state member banks seeking approval for an issuing subsidiary.
Neither proposal is final, and the Board has not approved an issuer through this action. The comment period will close 60 days after publication in the Federal Register. As of September 27, the Board's notices still carried a placeholder rather than a calendar deadline. Federal Reserve.
One-for-one reserves and redemption standards
The main proposal would require a Board-supervised permitted payment stablecoin issuer to maintain reserves at least equal to the value of its outstanding stablecoins. The notice identifies cash, balances held at the Federal Reserve, demand deposits, short-dated U.S. Treasury instruments, qualifying overnight repurchase and reverse-repurchase agreements and eligible government money-market funds among the proposed reserve categories.
Reserves would have to be segregated from the issuer's other assets and managed with diversification and liquidity controls. The proposal would require normal-course redemption within no more than two business days after a valid request, subject to the rule's conditions.
Those requirements are designed to connect the stablecoin liability to assets that can be converted into cash when holders redeem. They do not mean every permitted reserve has identical credit, market, operational or settlement risk. The Board asks for comment on several details, including treatment of foreign-currency stablecoins and redemption arrangements.
Capital targets issuer and operational risks
The proposal would add standardized capital requirements for credit and operational risks arising from payment-stablecoin activity. It would also impose risk-management, audit, reporting and recordkeeping requirements and restrict an issuer to activities permitted by the GENIUS Act and those directly supporting issuance and redemption.
Separate provisions would govern firms supervised by the Board that safeguard stablecoin reserve assets, stablecoins used as collateral or the private keys used to issue stablecoins. Proposed rules cover segregation, omnibus accounts and reporting. The Board also addresses the Act's tying prohibition and its backup authority over certain state-qualified issuers.
This is not a single universal U.S. stablecoin rulebook. The proposal applies to entities within the Board's jurisdiction and sits alongside GENIUS Act work by the Treasury, OCC, FDIC, NCUA and other agencies.
Banks would file a tailored application
The second proposal concerns an insured state member bank that wants a subsidiary to issue payment stablecoins. The bank would submit a business plan, financial information and documentation covering governance, risk management, compliance and controls.
The process would include review standards, appeals, hearings and final determinations. Filing an application would not itself authorize issuance, and the September 24 release does not identify any applicant or approved product.
For banks, that separation matters. The operating framework defines what a supervised issuer would have to do; the application rule defines how a bank asks permission to establish the issuing subsidiary. Both would need to reach final form before they can be treated as binding Board regulations.
Open questions remain material
Governor Michael Barr supported issuing the proposal but flagged questions about interest-rate risk, foreign-currency stablecoins, redemption risk and how the Act's “significant or systemic” standard should be applied. Those subjects can change the economics and risk profile of an issuer even if one-for-one backing remains the headline rule.
The next dated evidence is Federal Register publication, which will establish the exact comment deadline. After comments close, any final rule may differ from the September proposal. Product approvals and effective dates would require separate evidence.