Federal Reserve proposes new capital and redemption rules for stablecoin issuers

As part of the implementation of the GENIUS Act (Act United States ), the Federal Reserve has proposed capital, redemption time and other regulatory requirements for issuers under its supervision. This proposal clarifies issuer's capital accounting standards, redeemable timelines and disclosure obligations as a key step in establishing the federal regulation framework.

Capital Requirements are divided into three tranches according to the size of issuance

Under the proposal, issuers are required to contribute operational risk capital on a per-circulation basis: stablecoin circulating supply The part between $20 billion and $200 billion is raised at 2%, the part from $50 billion to $500 billion is increased by 1.5%, and the part above $500 million is raised by 1%. In addition, an issuer must meet additional capital requirements linked to credit and operating risks.

This tiered design implies a relative decrease in the aggregate capital burden for larger issuers, but overall capital will still increase significantly with business expansion.

Deadline for redemption and rules on dealing with reserve gaps

The proposal requires issuers to complete redemptions generally within two business days. If reserves fall below the statutory support ratio of 1:1, an issuer must notify the Federal Reserve and either replenish reserves or liquidate assets, redeem circulating stablecoin as planned.

This is a refinement of an existing requirement in the Genius Act, which requires issuers to back stablecoin with cash, bank deposits and short-term government bonds such as United States , but leaves more detailed capital, reserve diversification and risk management rules for federal regulators.

Monthly disclosures must be signed by the CEO and CFO

In terms of disclosure, issuers are required to publish monthly reports on the number and composition of stablecoin reserves in circulation. These disclosures must be audited by a registered accounting firm and certified by an issuer's chief executive officer (CEO) and chief financial officer (CFO).

A separate proposal establishes an application process for banks regulated by the Federal Reserve that wish to issue a form stablecoin through their subsidiaries, requiring submission of business plans and financial information.

The proposal will be open for public comment 60 days after it is published in the Official Gazette.

Chairman Barr: Markets must be able to redeem at face value under pressure

Federal Reserve Chairman Michael Barr on Thursday expressed support for the proposal, but noted that more work is needed to make stablecoin a reliable means of payment.

The stablecoin is only truly stable if it can be reliably and timely redeemed at face value under a variety of conditions, including periods when markets are stressed. Even government bonds that have good liquidity may experience shocks in their values; also during times when the issuer itself or its related entities find themselves in difficulty.

He welcomed the reserve asset limits and standardized capital requirements in the proposal, while calling for public input on whether existing frameworks are adequate to address interest rate risk and foreign exchange risks. He also raised two concerns: that a final rule should explicitly establish universal redemption rights; and that existing standards could result in the Fed's inability to take regulatory or enforcement action against AML deficiencies not identified as critical or systemic.

Effective date and follow-up

The GENIUS Act will go into effect on January 18, 2027, or 120 days after a federal regulator issues its final implementing rule, whichever comes first.

For issuers and the industry, the next 60-day comment period, the wording of the final rules - in particular Barr's proposed redemption rights and AML clauses - will determine how loose this regulatory framework actually is. For users, the redemptions deadline and monthly audit disclosure once it has landed will directly enhance transparency and payment certainty for regulated stablecoin .