Fed proposes GENIUS Act rules for stablecoin reserves and bank issuers

The Federal Reserve has released two proposed GENIUS Act rules covering the assets that must back payment stablecoins and the approval process for banks seeking to issue them through subsidiaries.

Summary

• Fed-supervised issuers would have to fully back their payment stablecoins with permitted reserve assets.
• The reserve proposal also covers capital, risk controls, and firms that hold backing assets.
• Insured state member banks would need Fed approval before a subsidiary could issue payment stablecoins.
• Public comments are due 60 days after the proposals appear in the Federal Register.

The Federal Reserve Board said in a Sep. 24 release that it is seeking public comment on two proposals for payment stablecoin issuers under its supervision. One sets operating requirements for issuers and firms holding their reserves; the other sets out how an insured state member bank would apply to issue stablecoins through a subsidiary.

The proposals would put detailed rules behind parts of the GENIUS Act that affect U.S. banks and stablecoin companies. They remain open to revision, and the 60-day comment period will begin when the notices are published in the Federal Register. The Fed has not set a calendar deadline in its release.

How the Fed would regulate stablecoin reserves

Under the first proposal, a Fed-supervised issuer would have to hold permissible assets that fully back its outstanding payment stablecoins. The Fed identified short-term U.S. Treasury bills and certain other high-quality, liquid assets as examples of eligible reserves. Full backing means the issuer must hold assets against the tokens it has issued, rather than rely on a smaller pool of reserves.

The draft would also set standardized capital requirements addressing credit and operational risks tied to payment stablecoins. Separate risk-management standards would govern how issuers run the activity. According to the Fed, the same proposal would introduce rules for firms it supervises that safeguard the assets backing stablecoins.

For a U.S. token holder, the reserve rules concern the assets behind a stablecoin issued by a firm within the Fed's remit. The proposal does not turn a payment stablecoin into an insured bank deposit. Its requirements apply to the covered issuer and its reserve arrangements, while the Fed's second proposal addresses a bank's request to enter the business.

The first draft would also clarify which stablecoin and related activities Fed-supervised banks may undertake. That provision sits alongside the issuer and reserve rules, giving banks a proposed regulatory basis for activities beyond an application to create a stablecoin-issuing subsidiary.

How banks would seek stablecoin approval

The second proposal applies specifically to insured state member banks seeking Fed approval for a subsidiary to issue payment stablecoins. Under the Fed's application draft, the bank would file the application with its appropriate Federal Reserve Bank. The bank, rather than the proposed subsidiary, would be the applicant.

Applicants would submit a business plan, financial information, and other material the Fed needs to assess the proposed operation. The filing would have to describe the plan, state what approval the bank is seeking, and explain why it should be granted under the factors in the GENIUS Act. The draft also sets procedures for hearings, appeals, and final decisions.

Timing is a material part of the bank proposal. The Fed would notify an applicant within 30 days whether its filing is substantially complete and identify additional information needed if it is not. Once an application is substantially complete, the GENIUS Act gives the Fed 120 days to decide; under the law, a complete application is deemed approved if the Fed does not decide within that period.

A material change could affect that clock. The Fed's draft says a substantial change to a proposed issuer's business plan, ownership, or financial condition may require more information and a new submission date. It also asks for comment on applications involving several banks in a stablecoin consortium, including whether a single filing could cover participating insured state member banks in some circumstances.

Those questions have a practical U.S. banking context. On Sep. 1, Bank of America, Citi, Goldman Sachs and 18 other financial institutions committed to establish a stablecoin company, according to a September report on the bank consortium. The group targeted a U.S. dollar token in the first half of 2027 and said it intended to meet applicable GENIUS Act requirements. Its announced plan does not establish that the venture would use the Fed application route described in this proposal.

Where the GENIUS Act rulemaking stands

The Fed's proposals join rulemaking already underway at other U.S. agencies. In August, crypto.news covered Treasury's proposed definitions for when payment stablecoins are issued, offered, or sold in the United States. Treasury's questions concern which activity falls under U.S. licensing and distribution restrictions, while the Fed's new drafts address issuers it supervises and applications from insured state member banks.

The Office of the Comptroller of the Currency has been working on a separate framework for issuers under its authority. As reported in August, Comptroller Jonathan Gould set a November target for final OCC rules after industry feedback. Its proposal covers matters including reserves, redemptions, custody, supervision and issuer applications. The OCC timetable does not set a completion date for the Fed's newly released proposals.

Treasury has identified Jan. 18, 2027, as the expected effective date for the GENIUS Act's main issuer restrictions. The statute also provides for an earlier start 120 days after the responsible federal regulators issue their final implementing rules. Federal agencies missed the law's July 18, 2026, deadline for completing those rules, leaving several proposals at different stages of review.

For the two Fed notices released on Sep. 24, interested banks, issuers, and other members of the public can submit comments during the 60-day period following Federal Register publication.

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