Federal Reserve Advances Stablecoin Regulatory Framework

The Federal Reserve published two draft rules on September 25, 2026, to implement the GENIUS Act, establishing capital, reserve, and application requirements for stablecoin issuers. These proposals mark the first concrete steps toward a federal regulatory framework for payment stablecoins, which will take effect in January 2027. The rules target the infrastructure behind stablecoins, focusing on how reserves are held and managed within the regulated banking system.

One proposal introduces capital and risk-management requirements and clarifies which stablecoin-related activities Federal Reserve-supervised banks can undertake. The second establishes a formal application process for banks seeking approval to issue payment stablecoins through subsidiaries. Bringing stablecoin issuance into the Fed's supervisory framework aims to give traditional financial institutions a defined role in digital payments development.

Stablecoin issuance requires bank authorization and reserve backing

Proposed rules mandate that banks apply for authorization to issue stablecoins and back tokens with high-quality, liquid assets. Issuers must fully back their tokens with permitted reserve assets, including short-term US Treasury bills. If this backing falls below a 1:1 ratio, issuers must immediately notify the Federal Reserve. They must also present a recovery plan or begin liquidating assets and initiating redemptions.

Monthly reporting on reserve composition is required, with verification by a registered auditing firm. Issuers must fulfill redemption requests within two business days. Capital requirements to cover operational risk are tiered based on the volume of stablecoins in circulation.

Regulatory framework targets risk management and redemption safeguards

The proposals impose strict redemption safeguards and capital buffers. Federal Reserve Board member Michael Barr supported the initiative but called for a clearer definition of universal redemption rights and better consideration of interest rate and currency risks. He stated that stablecoins must be reliably and promptly redeemable at par in various conditions, including market stress and issuer strain.

The framework also creates rules for firms that safekeep stablecoin backing assets and establishes a detailed process for appeals, hearings, and final decisions on bank applications. Applicants must submit a comprehensive package including business plans and financial information.

These Fed proposals add another layer to the implementation of the GENIUS Act, which President Donald Trump signed on July 18, 2025. Other agencies, including the Office of the Comptroller of the Currency and the Treasury Department, have issued their own proposals, but no stablecoin regulations have been finalized as of September 2026. The Federal Reserve is behind the GENIUS Act's July 2026 deadline for regulators to establish rules. The proposals will undergo a 60-day public comment period following their Federal Register publication, with final rules expected by July 2026 to meet the GENIUS Act's implementation deadline.