The Fed proposes capital and reserve rules for stablecoin issuers, and says no bank it supervises owns one yet

What happened

The Federal Reserve Board requested public comment on 24 September 2026 on two proposals implementing the GENIUS Act. The first, a 392 page notice under docket R-1899, sets the framework for what the Board calls Board-supervised permitted payment stablecoin issuers: reserves, capital, permissible activities, risk management, reporting and enforcement, with rules for the firms it supervises that hold reserve assets in custody and a prohibition on tying that applies to every permitted issuer, including those the Board does not supervise. The second, under docket R-1900, sets how an insured state member bank applies for approval for a subsidiary to issue. Both comment periods close 60 days after publication in the Federal Register. The staff memos to the Board are dated 3 September. Reserves must at all times have a fair value at least equal to the par value of coins outstanding. The staff memo lists what counts: US dollar cash, Federal Reserve Bank balances, demand deposits at insured institutions, Treasuries with 93 days or less to run, overnight repo and reverse repo against Treasuries, funds invested solely in those assets, "and tokenized versions of some of the foregoing assets". The proposed rule admits a tokenized reserve only where it "confers legal rights that are identical to those of the non-tokenized form of the same asset". Redemption must be possible within two business days, which the Board may extend where an issuer faces a threat to its safety and soundness or poses one to financial stability. Capital comes in two parts. Uninsured deposits and undercollateralised reverse repo held as reserves carry a two per cent charge. Operational risk carries a graduated charge on coins outstanding, "2.0 percent for the first $20 billion of outstanding stablecoins, 1.5 percent for the next $30 billion, and 1.0 percent for outstanding stablecoins exceeding $50 billion", plus 25 per cent of the three-year average of revenue from anything other than reserve assets. An issuer below its minimum at a quarter end must file a plan; still below at the next, it must liquidate its reserves and redeem. The yield prohibition is where the proposal reaches past the statute's words. Following the OCC's proposed approach, the Board would presume an issuer is paying interest or yield to a holder where it has an arrangement to pay an affiliate or a related third party, and that party has an arrangement to pay a holder of the issuer's coins "solely in connection with the holding, use, or retention of such payment stablecoin". Related third parties include anyone paying holders as a service on the issuer's behalf and anyone the issuer issues for under a white label. The preamble writes in two exceptions: the prohibition is "not intended to prevent a merchant from independently offering a discount", nor to stop an issuer "from sharing in the profits derived from the payment stablecoin with a non-affiliate partner in a white-label arrangement".

Why it matters

The Board's economic analysis says "no Board-supervised bank currently owns a stablecoin issuer", and that there are "currently no PPSIs operating under a uniform Federal framework in the United States". So a capital and reserve regime written at this length applies today to nobody. Its reach depends on two routes into the Board's perimeter: a state member bank opening an issuing subsidiary, or a state-qualified issuer that is an uninsured depository institution with $10bn or more outstanding moving across from state supervision, which the proposal lets the Board waive. The largest issuers the market knows are in neither category on anything published today. The capital schedule is the part that prices scale, and it falls as a share of the book as the book grows. Worked through, an issuer with $20bn outstanding would hold $400m against operational risk, 2 per cent; one with $50bn, $850m, 1.7 per cent; one with $100bn, $1.35bn, 1.35 per cent. The Board's reason is written into the memo: operational risk "may not increase linearly" with growth. The yield presumption needs both legs. A payment from issuer to partner is presumed to be prohibited yield only where the partner in turn pays holders, so a fee paid to a distributor that passes nothing on is outside it, though the preamble says arrangements outside the presumption "may also violate the statutory prohibition or constitute an evasion thereof" and will be judged case by case. Whether the monthly fee Circle agreed to pay Binance on 22 September, calculated on USDC held in one Circle wallet product, would be caught therefore depends on what Binance pays its own users, which neither Circle document says. CoinDesk's reading is that the agencies "seem to be allowing a very narrow approach by crypto platforms to offer stablecoin rewards akin to credit-card incentive programs", and it notes that with the Clarity Act failed, the GENIUS Act is now the primary law on rewards.

What is not settled

Interest rate risk on reserves has no charge yet, and the Board is asking what one should be. Among more than 250 numbered questions, the notice asks what calibration it should consider, offering "a calibration of the interest rate increase in the range of half a percent to three percent" as an example. Governor Barr, who supported the proposal, wants public input on "whether the rule adequately addresses interest rate and foreign currency risks", and said that in any final rule he wants addressed the standard under which the Board could act on an anti-money laundering deficiency only if it is "significant or systemic", which he said "may have unknown effects on the Board's ability" to establish that an institution keeps a compliant programme. The timetable is not the Board's to set. The memo gives the Act's effective date as the earlier of 18 January 2027 or 120 days after the primary federal regulators issue final rules, and CoinDesk reports the agencies are past the statutory deadline of July 2026 for their regulations. A 60 day comment period that starts on Federal Register publication leaves the Board less than two months before January even if it finalises at once. How the tokenized reserve test of identical legal rights would be demonstrated in practice is not set out in the text the desk read.