The Federal Reserve has proposed a detailed supervisory framework for payment stablecoin issuers under its jurisdiction, translating the GENIUS Act into operating requirements for reserves, capital, redemptions, custody and bank applications.
The September 24 package contains two notices of proposed rulemaking. The broader proposal would govern Board-supervised permitted payment stablecoin issuers and certain custodians. A companion proposal would establish an application process for insured state member banks seeking approval for a subsidiary to issue payment stablecoins.
Neither proposal is final. Comments are due 60 days after publication in the Federal Register, and the Federal Reserve had not supplied a calendar deadline in the notices released Thursday.
Full backing would be tested at fair value
The central control is a requirement that a Board-supervised issuer maintain identifiable reserve assets whose total fair value equals or exceeds the value of its outstanding stablecoins at all times. The proposed rule would limit reserves to eligible assets permitted by the GENIUS Act, including U.S. currency, balances at a Federal Reserve Bank, eligible demand deposits, short-dated Treasury bills, qualifying repurchase agreements and certain government money market funds.
Reserves generally would have to be segregated from other assets and protected from claims by non-stablecoin creditors until token holders had been redeemed at par. Issuers would be barred from pledging, reusing or rehypothecating reserves except for specified purposes connected to permitted reserve investments, standard custody services or liquidity arrangements.
The proposal also addresses transparency. An issuer would publish a monthly report showing outstanding tokens and the fair value and composition of reserves, including average tenor and the geographic location where each reserve category is held. This would give counterparties more information than a simple assertion that a token is “fully backed.”
Redemption and capital rules target run and operating risk
Board-supervised issuers would need public redemption policies and generally could not take longer than two business days to redeem a token for fiat currency. The proposal includes limited safe harbors where extra time is needed for legally required customer identification, sanctions or anti-money-laundering review, or where delay is outside the issuer’s control.
Capital would sit alongside, rather than replace, the one-to-one reserve requirement. The proposed framework includes components for credit and counterparty risk in reserve assets, financial risk in non-reserve assets and operational risk from issuing and redeeming tokens or managing reserves. Newly approved issuers would face, for a three-year de novo period, the higher of the generally calculated minimum and a $5 million floor indexed to nominal U.S. gross domestic product. The Board could adjust requirements based on an issuer’s risks.
That distinction matters for risk teams. Reserves are intended to support redemption claims, while capital is intended to absorb losses arising from exposures and operational failures. A reserve portfolio can meet the nominal backing test and still leave an issuer exposed to custody, technology, fraud, counterparty or execution risk.
If an issuer fell short of reserve requirements, the proposed rule could require a compliance plan and, under specified conditions, liquidation of reserves and redemption of outstanding tokens. A capital breach could also trigger a remediation plan and possible liquidation. Those mechanisms make reserve and capital reporting part of an escalation framework rather than a disclosure exercise alone.
Custodians would carry direct control obligations
The proposal would impose requirements on Board-supervised firms safeguarding stablecoin reserves, stablecoins used as collateral or associated private keys. Covered custodians would have to treat customer assets separately from their own property, maintain possession or control, segregate covered assets and oversee sub-custodians through appropriate safeguards and internal controls.
For banks and service providers, the practical question is therefore not only whether an asset is eligible. Contracts, account structures, ownership records, key control and sub-custody arrangements would need to preserve the legal and operational separation on which the backing claim depends.
State member banks would face a defined approval process
The companion proposal applies to insured state member banks seeking approval for a subsidiary to issue payment stablecoins. Applications would include a business plan, financial information and details about governance, risk management, compliance and proposed operations.
The Board would have 120 days to decide a substantially complete application. A denial could be based on a finding that the applicant’s activities, including those of the proposed issuer subsidiary, would be unsafe or unsound. The proposal also sets procedures for written or oral hearings and final determinations when an applicant challenges a denial.
The package creates a clearer route for bank-affiliated issuance, but it does not grant any bank permission to issue a stablecoin and does not guarantee approval. Firms considering issuance or providing reserve, custody, compliance and technology services should treat the notices as proposed design specifications that may change after public comment.
The wider significance is accountability across the stablecoin operating chain. The proposals place measurable obligations on issuers while extending control expectations to banks and custodians that enable reserve management, safekeeping and distribution. Whether the final regime closes practical gaps will depend on its treatment of concentration, sub-custody, operational incidents, delayed redemptions and the evidence supervisors require when backing or capital falls short.