Fed Proposes Dollar‑Backed Stablecoin Rulebook Under GENIUS Act

The Federal Reserve released a detailed proposal for bank‑issued payment stablecoins, aiming to enforce a strict one‑to‑one reserve backing and clear redemption timelines.

One‑Dollar Reserve Requirement

Issuers would need to hold at least $1 of permitted reserve assets for each $1 of stablecoins in circulation. Permitted reserves include:

• U.S. dollars
• Federal Reserve Bank balances
• Qualified bank deposits
• Treasury securities with 93 days or less to maturity
• Qualifying repurchase agreements
• Eligible investment funds
• Tokenized versions of permitted assets

These reserves must be kept separate from the issuer’s other assets, and any shortfall must be reported to the Fed.

Redemption and Capital Rules

Stablecoin holders would be entitled to redemption within two business days. Capital charges would range from 2% on the first $20 billion of outstanding stablecoins to 1% on amounts above $50 billion. If an issuer falls below the required capital at the end of a quarter, it must liquidate reserves and redeem all tokens unless the Fed directs otherwise.

Bank Application Process

A companion proposal outlines how insured state‑member banks can seek Fed approval for subsidiaries that issue stablecoins. Applicants must submit a business plan, financial data, policies, and three‑year projections. Once the application is deemed substantially complete, the Fed has 120 days to decide; failure to act within that period results in automatic approval. A material change can reset the clock.

Regulatory Feedback and AML Concerns

Fed Governor Michael Barr supports the framework but emphasizes the need for clear “universal redemption rights” and stronger anti‑money‑laundering (AML) oversight. He noted that the proposal currently requires an AML deficiency to be “significant or systemic” before the Fed can take supervisory action. Public comments are open for 60 days.