Fed Sets Proposed Framework for Stablecoin Reserves and Bank Issuers

The US Federal Reserve has introduced two proposed regulatory frameworks aimed at implementing parts of the GENIUS Act governing payment stablecoins.

The proposals address two key areas: the assets that stablecoin issuers must hold to back their tokens and the process banks must follow to obtain approval to issue payment stablecoins through subsidiaries.

In a Sept. 24 announcement, the Federal Reserve Board said it was seeking public feedback on both proposals. The first establishes operational, reserve and risk-management requirements for payment stablecoin issuers under the Fed’s supervision, as well as companies responsible for safeguarding their reserve assets.

The second proposal outlines the application process for insured state member banks that want to establish subsidiaries specifically for issuing payment stablecoins.

Proposed Reserve Requirements for Stablecoins

Under the first framework, payment stablecoin issuers supervised by the Federal Reserve would be required to maintain eligible assets equal in value to all outstanding stablecoins they have issued.

The Fed cited short-term US Treasury bills and certain other high-quality, liquid assets as examples of assets that could qualify as reserves.

The full-reserve requirement would require issuers to maintain sufficient assets to match the value of their outstanding tokens. In other words, issuers would not be permitted to support a larger supply of stablecoins with a smaller pool of reserve assets.

The proposal is designed to provide more detailed regulatory requirements for provisions of the GENIUS Act that apply to US banks and stablecoin companies. However, the framework remains subject to change following the public comment process.

The 60-day comment period will begin once the proposals are formally published in the Federal Register. The Federal Reserve did not specify a calendar deadline in its announcement.

Capital and Risk Management Rules for Issuers

Beyond reserve requirements, the proposed framework would establish standardized capital requirements for risks associated with payment stablecoin activities.

These requirements would address credit and operational risks while introducing additional standards governing how supervised issuers manage their stablecoin operations.

The proposal would also establish requirements for companies under the Fed’s supervision that hold or safeguard the assets backing payment stablecoins.

For US stablecoin holders, the rules would determine how reserve assets must be maintained when the issuer falls under the Federal Reserve’s regulatory oversight.

However, the framework would not give payment stablecoins the status of insured bank deposits. Instead, the proposed requirements would apply to the issuer and the arrangements used to maintain its reserves.

Fed Clarifies Banks’ Stablecoin Activities

The first proposal would also clarify which stablecoin-related activities could be conducted by banks supervised by the Federal Reserve.

This provision would operate alongside the proposed reserve and issuer requirements, potentially giving supervised banks a regulatory framework for engaging in certain stablecoin activities beyond simply establishing a subsidiary to issue the tokens.

The broader framework would therefore cover both the operational requirements for issuers and the types of stablecoin-related activities banks could conduct under Federal Reserve supervision.

How Banks Could Apply to Issue Payment Stablecoins

The second proposal focuses specifically on insured state member banks seeking permission to establish subsidiaries that would issue payment stablecoins.

Under the Federal Reserve’s draft application framework, the bank would submit its application to the appropriate Federal Reserve Bank. The parent bank, rather than the proposed subsidiary, would be responsible for submitting the application.

Applicants would need to provide a business plan, financial information and other documentation required by the Fed to evaluate the proposed activity.

The application would also need to explain the nature of the proposed operation, identify the approval being requested and demonstrate why the application meets the relevant criteria established under the GENIUS Act.

The proposed framework would additionally establish procedures covering hearings, appeals and final decisions.

120-Day Decision Period Under the GENIUS Act

The proposed approval process includes specific deadlines for Federal Reserve review.

Within 30 days of receiving an application, the Fed would notify the bank whether the filing is substantially complete. If additional information were required, the regulator would identify what was missing.

Once an application is considered substantially complete, the GENIUS Act provides the Federal Reserve with 120 days to reach a decision.

Under the law, an application would be deemed approved if the Fed fails to make a decision within that statutory period.

Business Changes Could Restart the Review Process

The proposed rules also address situations in which significant changes occur during the application process.

A substantial modification to a proposed issuer’s business plan, ownership structure or financial condition could lead the Federal Reserve to request additional information and establish a new submission date.

The Fed is also seeking feedback on applications involving multiple banks participating in the same stablecoin consortium.

Among the questions under consideration is whether, under certain circumstances, a single application could cover several insured state member banks participating in the same consortium.

Major US Banks Explore Stablecoin Venture

The proposed rules come as major US financial institutions are already exploring a joint stablecoin initiative.

On Sept. 1, Bank of America, Citi, Goldman Sachs and 18 other financial institutions committed to establishing a stablecoin company, according to a September report on the banking consortium.

The group is targeting the launch of a US dollar-backed token during the first half of 2027 and has said it intends to comply with applicable requirements under the GENIUS Act.

However, the consortium's announcement does not establish that the planned venture would use the specific Federal Reserve application pathway outlined in the new proposal.

What the Fed’s Stablecoin Rules Could Mean for US Banks

The Federal Reserve’s proposals add further detail to the regulatory framework emerging around payment stablecoins in the United States, particularly regarding reserve quality, risk management and banks’ participation in the sector.

Requiring issuers to fully back outstanding tokens with eligible assets could also make reserve composition and asset management an increasingly important part of the regulatory oversight of stablecoins.

At the same time, the proposals remain subject to public comments and potential revisions. Their practical impact will therefore depend on the final rules and how regulators apply them to individual issuers, banks and multi-institution stablecoin ventures.

The timing is also significant as major financial institutions are already preparing potential stablecoin projects. If the proposed framework is finalized largely along its current lines, the combination of reserve requirements and a defined bank approval process could provide a clearer regulatory structure for traditional financial institutions seeking to enter the payment stablecoin market.