The Federal Reserve Board on September 24 published two notices of proposed rulemaking that would impose bank-grade reserve, capital, and risk-management standards on payment stablecoin issuers under its supervision. The proposals complete the Fed's leg of a three-agency regulatory build-out — fo...
"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." — Michael S. Barr, Governor, Federal Reserve Board
The Federal Reserve Board on September 24 published two notices of proposed rulemaking that would impose bank-grade reserve, capital, and risk-management standards on payment stablecoin issuers under its supervision. The proposals complete the Fed's leg of a three-agency regulatory build-out — following the OCC (February 2026) and the FDIC (April 2026) — that together operationalize the GENIUS Act signed into law on July 18, 2025, the first federal statute governing fiat-backed stablecoins in the United States.
The rules land on a $302.8 billion market dominated by two private issuers — Tether (USDT, $183.4B, 60.6% share) and Circle (USDC, $74.2B, 24.5% share) — just as a 21-bank consortium is preparing to launch a rival dollar-denominated stablecoin in H1 2027. With enforcement deadlines beginning in January 2027 and a full compliance cutoff projected near mid-2028, the regulatory clock is now running for every issuer serving U.S. customers.
The Board released two distinct rulemaking packages, each open for 60 days of public comment following Federal Register publication.
Proposal 1 — Reserve, Capital, and Risk Management. Board-supervised permitted payment stablecoin issuers (PPSIs) would be required to maintain full 1:1 backing of outstanding tokens with permissible reserve assets at all times. Eligible reserves are restricted to highly liquid instruments, primarily short-dated U.S. Treasury bills and comparable high-quality assets. The proposal introduces standardized capital requirements to address credit and operational risks inherent in stablecoin issuance, including a tiered capital surcharge that scales from 2% down to 1% as outstanding issuance exceeds $50 billion. A $5 million initial capital floor would apply to newly approved issuers during their first three years.
Proposal 2 — Application Process. The second package establishes the procedural framework for Board-supervised insured depository institutions seeking to issue payment stablecoins through subsidiaries. Applicants must submit business plans, financial projections, and supporting documentation. The rule creates formal procedures for appeals, hearings, and final determinations on applications.
Both proposals received unanimous Board votes, though Governor Barr issued a separate statement flagging concerns about anti-money-laundering enforcement gaps and run risk — warning that the "significant or systemic" threshold for AML action embedded in the GENIUS Act could weaken the Fed's capacity to respond.
The Fed's September action completes a regulatory trifecta that began seven months earlier. The timeline:
| Agency | Action | Date | Scope | |--------|--------|------|-------| | OCC | Notice of Proposed Rulemaking | February 25, 2026 | National banks, federal savings associations, OCC-licensed nonbank issuers, foreign issuers | | FDIC | Notice of Proposed Rulemaking | April 7, 2026 | FDIC-supervised PPSIs and insured depository institutions | | Federal Reserve | Two Notices of Proposed Rulemaking | September 24, 2026 | State member bank subsidiaries, state-chartered institutions with $10B+ in stablecoins |
The OCC's proposal covers the broadest issuer base: national banks, their subsidiaries, federal branches, and — critically — nonbank entities seeking Federal Qualified Payment Stablecoin Issuer status. The OCC had already granted national trust bank charters to Circle, Paxos, and three other firms as of December 2025.
The FDIC's April proposal added two-business-day redemption requirements for FDIC-supervised issuers, weekly and quarterly reporting mandates, and clarification that deposits held as stablecoin reserves at insured depository institutions qualify for FDIC deposit insurance coverage.
Across all three agencies, common threads emerge: 1:1 reserve backing in short-term Treasuries and equivalent liquid assets, prohibition on paying interest or yield to stablecoin holders, and mandatory weekly and quarterly reporting. The prohibition on yield — codified in the GENIUS Act itself — represents a structural constraint that separates regulated stablecoins from interest-bearing bank deposits and money-market instruments.
The stablecoin market stood at $302.8 billion as of September 10, 2026, according to Stablecoin Beat, having contracted 0.8% over the prior 90 days. The market remains highly concentrated:
| Issuer | Token | Market Cap | Share | |--------|-------|-----------|-------| | Tether | USDT | $183.4B | 60.6% | | Circle | USDC | $74.2B | 24.5% | | Other | Various | $45.2B | 14.9% |
USD-pegged tokens account for 99.4% of total stablecoin supply.
The GENIUS Act permits three categories of issuers: federally chartered banks, OCC-supervised nonbank issuers, and state-qualified issuers operating under state regimes certified as substantially similar to the federal framework. Non-compliant issuers face prohibition from U.S. exchanges after a transition period concluding approximately mid-2028.
Circle and Paxos, both holding OCC national trust bank charters, are positioned as early compliance exemplars. Circle has publicly aligned its operations with GENIUS Act requirements and published detailed compliance documentation. Paxos operates similarly, issuing USDP and the Binance-branded BUSD successor under its charter.
On September 1, twenty-one financial institutions announced plans to form a company that would issue a U.S. dollar stablecoin for commercial cross-border payments and digital asset settlement. The unnamed entity is expected to be formally established in H2 2026, with a market launch targeted for H1 2027.
Participating institutions span four continents:
The consortium intends to comply with both the GENIUS Act in the U.S. and MiCA in the EU, with plans to expand beyond USD to other G7 currencies, starting with the euro.
JPMorgan, notably absent from the consortium, operates its own tokenized deposit product (JPM Coin) but has not committed to issuing a standalone stablecoin. The bank stated it would "evaluate all options" depending on customer demand and regulatory developments.
The consortium's entry reshapes competitive dynamics. Unlike Tether and Circle, which operate as technology companies with banking relationships, the 21-bank group brings existing balance sheets, regulatory relationships, and commercial payment networks. The target use case — cross-border commercial payments — represents a segment where traditional banking rails still process the majority of volume but where stablecoin settlement offers speed and cost advantages.
Tether, the market's dominant issuer at $183.4 billion in outstanding USDT, has adopted a bifurcated compliance approach. The company announced plans to register USDT under the GENIUS Act's foreign issuer pathway, which would allow continued offshore operations while meeting U.S. regulatory requirements.
Separately, Tether launched USAT (USA₮) on January 27, 2026, a U.S.-focused stablecoin issued through Anchorage Digital Bank, N.A., a federally chartered digital asset bank. Cantor Fitzgerald serves as USAT's designated reserve custodian and preferred primary dealer. According to a December 2025 disclosure, USAT reported 17,501,391 redeemable tokens outstanding with total reserve assets of $17,604,716 — a $103,325 surplus — held primarily in reverse repurchase agreements collateralized by U.S. Treasury securities ($13.95M) and cash ($3.65M).
USAT's scale remains negligible relative to USDT. As Forbes characterized the arrangement: "Tether's USAT exists so USDT never has to comply." The structure creates a ring-fenced, GENIUS Act-compliant U.S. subsidiary while preserving the $183 billion offshore USDT float outside direct U.S. regulatory jurisdiction.
The GENIUS Act gives non-U.S. issuers a two-year transition window. After approximately mid-2028, stablecoins that fail to meet the Act's standards — whether through domestic compliance or the foreign issuer pathway — face delisting from exchanges serving U.S. customers. For Tether, this deadline represents an existential regulatory test: the company must either achieve foreign issuer certification or lose access to the largest single market for digital asset trading.
The three-agency rulemaking framework creates a regulated infrastructure layer beneath the stablecoin market that mirrors traditional banking supervision in structure — reserve requirements, capital adequacy, reporting mandates — while operating under a distinct legal regime that prohibits interest payments and mandates Treasury-bill-grade backing.
Treasury market absorption. Full 1:1 reserve backing in short-term Treasuries and equivalent instruments means the $302.8 billion stablecoin market currently requires a comparable volume of T-bill holdings. If the 21-bank consortium and additional bank-issued stablecoins expand the market, demand for short-dated government securities from stablecoin reserves would increase proportionally. According to the BIS, stablecoin reserves already constitute a meaningful share of short-dated Treasury demand.
Competitive structure. The regulatory framework advantages established financial institutions. The OCC charter pathway, the Fed's application process for bank subsidiaries, and the FDIC's insurance clarifications all favor entities with existing banking infrastructure. Nonbank issuers like Circle and Paxos obtained charters early; new entrants face higher barriers as final rules take effect.
Fee economics. The prohibition on yield payments to holders forces stablecoin issuers into a business model where revenue derives from reserve asset returns (currently ~3.5% APY on short-term Treasuries) and transaction fees rather than spread between interest earned and interest paid. At $303 billion in reserves earning approximately 3.5%, the theoretical gross annual revenue pool for the entire stablecoin industry from reserve yields alone exceeds $10 billion — none of which flows to token holders under the Act.
The Fed's two proposed rules mark the final piece of a regulatory architecture that, once finalized, will subject the stablecoin market to supervision comparable in scope — if not identical in structure — to the commercial banking system. The 60-day comment period will likely surface industry objections to capital treatment and reserve asset restrictions; the American Bankers Association has already signaled intent to seek modifications to the state-qualified issuer approval process.
The market's response will unfold along two axes: compliance cost absorption by existing issuers, and entry timing by the 21-bank consortium. If the consortium launches on schedule in H1 2027, the stablecoin market would shift from a duopoly dominated by two technology companies to a three-way competition that includes the traditional banking sector — all operating under a common regulatory framework that did not exist 14 months ago.