The Federal Reserve Board issued two proposals on September 24 that would set the prudential terms for banks it supervises to issue payment stablecoins. The first covers reserves, capital and risk management. The second covers how a bank applies for permission. Both are open for comment for 60 days after they appear in the Federal Register.
Full backing, and a capital charge on top of it
The first proposal would require a stablecoin to be fully backed by permissible reserve assets, which the Board describes as short-term Treasury bills and certain other high-quality, liquid assets. Full backing alone is not the whole framework: the proposal also sets standardized capital requirements addressing credit and operational risk, risk management standards for the activity, and rules for the safekeeping of the assets held against the coin.
That combination answers a question issuers have asked since the GENIUS Act passed. Reserves cover redemption. Capital covers the issuer's own failures, from a custodian default to an operational break, and it sits on the bank's balance sheet rather than in the reserve pool.
| Proposal | Scope | What a bank must show |
|---|---|---|
| Reserves, capital, risk management | Payment stablecoin activity at Board-supervised banks | Full backing by permissible reserve assets, standardized capital for credit and operational risk, risk management standards, safekeeping rules |
| Application process | Banks seeking approval to issue, including through a subsidiary | A business plan and financial information, with procedures for appeals, hearings and a final determination |
The second proposal matters as much as the first for anyone planning a launch. It turns issuance into an authorization with a file, a review and a decision that can be appealed, rather than a product a supervised bank can simply add to its range.
Governor Barr says the work is not finished
Governor Michael S. Barr supported the proposal and put the limits of the exercise on the record. He said he is encouraged by the provisions for reserve asset limitations and by transparent, standardized capital requirements, asked for public input on whether the rule adequately addresses interest rate and foreign currency risks, and said universal redemption rights must be clear in the final rule. He also flagged the “significant or systemic” standard that would govern anti-money laundering supervision. His closing line: “While the Board's proposal is an important step in GENIUS Act implementation, further work will undoubtedly be required if stablecoins are to be reliable payment instruments.”
Capital math and the authorization process
For a payment company, the capital math and the safekeeping rules weigh more than the headline requirement, because both decide the cost of holding reserves. For a merchant or a PSP considering settlement in a bank-issued stablecoin, the application process sets when a counterparty can actually go live.
Nothing in either proposal is in force. What they establish is the shape of the eventual rule, and the questions the Board wants answered before it writes one.