US Market: Fed proposes new rules for stablecoin issuers under GENIUS Act

The proposals would establish requirements for payment stablecoin issuers that are supervised by the Federal Reserve, including rules on reserves, capital and risk management. The Fed said the framework is intended to carry out responsibilities assigned to it under the GENIUS Act.

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Stablecoins to be fully backed by reserves

Under the proposed rules, Fed-supervised payment stablecoin issuers would be required to fully back their tokens with permitted reserve assets. These would include short-term US Treasury bills and other high-quality, liquid assets, according to the Federal Reserve.
The requirement is designed to ensure that issuers maintain sufficient assets to support the value of stablecoins issued under the federal framework.

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Capital requirements for issuers

The proposal would also introduce standardized capital requirements for stablecoin activities. The requirements are intended to address credit and operational risks associated with payment stablecoin issuance.
Also Read | US stocks: S&P 500 ends nearly flat as US-Iran talks help stocks pare lossesThe Fed would additionally establish risk-management standards for supervised firms involved in stablecoin activities.

Rules for banks holding stablecoin reserves

The proposed framework would extend beyond stablecoin issuers to Fed-supervised banks that safeguard assets backing the tokens.

The rules would establish requirements for banks that provide custody services for stablecoin reserves and clarify which stablecoin-related activities Fed-supervised banks would be permitted to conduct.

Path for banks to issue stablecoins

The Fed is also proposing a separate application process for Board-supervised banks seeking approval to issue their own payment stablecoins.

Banks applying under the framework would have to provide information including a business plan and financial details. The proposal would also establish procedures covering appeals, hearings and final decisions on applications, according to a report by Reuters.

60-day public comment period

The Federal Reserve will accept public comments on the proposed rules for 60 days after their publication in the Federal Register.

The proposals represent a key step in putting the GENIUS Act’s federal stablecoin framework into practice and defining how banks and other supervised institutions can participate in the growing digital-asset payments market.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)