The Federal Reserve Board on September 24 released two proposed rules implementing the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), becoming the last of three primary federal regulators to issue draft stablecoin frameworks. The proposals would require Board-...
"Stablecoins will only be stable if they can be reliably and promptly redeemed at par in a range of conditions." — Michael S. Barr, Governor, Federal Reserve Board
The Federal Reserve Board on September 24 released two proposed rules implementing the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), becoming the last of three primary federal regulators to issue draft stablecoin frameworks. The proposals would require Board-supervised payment stablecoin issuers (PPSIs) to maintain 1:1 reserves in short-duration U.S. Treasuries and other high-quality liquid assets, meet a 2% capital floor on the first $20 billion of issuance, redeem tokens within two business days, and submit weekly reserve disclosures.
The Fed's entry completes a regulatory triptych that began with the OCC's proposed rule on February 25, followed by the FDIC on April 7. All three agencies missed the GENIUS Act's July 18, 2026, statutory deadline for final rules. With the law set to take effect no later than January 18, 2027, the combined 60-day comment period and finalization window leaves fewer than four months to convert three sets of proposals into enforceable regulation governing the $302.8 billion stablecoin market.
The Board published two separate notices of proposed rulemaking on September 24. The first establishes enforceable standards for Board-supervised PPSIs covering reserve composition, capital adequacy, risk management, custody, and ongoing reporting. The second outlines the application process for state member banks seeking to form subsidiaries that issue payment stablecoins, including submission requirements, approval timelines, and appeal procedures.
Under the subsidiary application framework, the Fed must notify applicants within 30 days if a submission is incomplete. Once deemed complete, the agency has 120 days to approve or deny the application. Failure to act within that window results in automatic approval — a mechanism mirroring the FDIC's parallel proposal.
Both proposals are open for public comment for 60 days following Federal Register publication.
Governor Barr, in a statement accompanying the release, expressed support for the proposals while noting areas of concern. He flagged potential limitations in the "significant or systemic" standard for anti-money laundering compliance, stating: "I am concerned that the 'significant or systemic' standard may have unknown effects on the Board's ability to effectively substantiate that an institution establishes and maintains compliant programs." He added that "further work will undoubtedly be required if stablecoins are to be reliable payment instruments."
The reserve framework restricts eligible backing assets to a narrow band of short-duration, high-quality instruments:
The 93-day maturity cap is the most operationally consequential provision. It compresses the eligible Treasury universe to bills maturing within roughly three months, a constraint designed to ensure that issuers can meet redemption demands without forced asset sales during periods of rate volatility. This is a direct response to the March 2023 Silicon Valley Bank episode, where longer-duration government securities lost mark-to-market value during rapid rate increases.
For context, a 93-day maturity constraint would have excluded roughly 85% of outstanding Treasury securities as of September 2026, according to Treasury Department auction data. Issuers managing large reserves — USDT's backing pool exceeds $183 billion — would face significant concentration in the shortest segment of the yield curve.
The proposals also enforce a strict prohibition on paying interest or yield to stablecoin holders, consistent with the GENIUS Act's statutory language. Certain third-party arrangements that effectively pass through yield would be presumed prohibited, though the Fed is soliciting comment on the scope of this presumption.
Capital. The proposals establish a tiered capital requirement: 2% of outstanding stablecoin issuance on the first $20 billion. This structure imposes lower absolute capital charges on smaller issuers while scaling requirements proportionally. A $20 billion issuer, for example, would need to hold $400 million in capital against identifiable credit and operational risks. A newly approved issuer faces a $5 million initial capital floor during its first three years of operation.
Redemption. PPSIs must process redemption requests within two business days. If reserves fall below par value of outstanding stablecoins at any point, the issuer must notify the Fed immediately. This mandatory notification trigger functions as an early-warning system, conceptually similar to the net-capital alerts required of broker-dealers.
Reporting. Weekly reserve disclosures are required. This cadence represents a significant increase over current market practice — Circle, for instance, currently publishes monthly attestation reports on USDC reserves. Tether completed its first unqualified audit by KPMG in August 2026, after years of operating with quarterly attestations from BDO Italia.
The GENIUS Act assigned implementation duties to three primary federal regulators based on charter type:
| Regulator | Scope | NPRM Published | Comment Period Closed | |-----------|-------|----------------|-----------------------| | OCC | National banks, federal savings associations, OCC-licensed issuers | Feb. 25, 2026 | May 1, 2026 | | FDIC | FDIC-supervised insured depository institutions | Apr. 7, 2026 | Jun. 9, 2026 | | Federal Reserve | State member banks, Board-supervised nonbank issuers | Sep. 24, 2026 | ~Nov. 23, 2026 |
The statutory deadline for all three agencies to issue final rules was July 18, 2026 — one year after the GENIUS Act's enactment. All three missed it. The OCC and FDIC completed their comment periods months ago but have not finalized rules. The Fed published its proposals two months after the deadline.
The GENIUS Act takes effect on the earlier of January 18, 2027, or 120 days after final rules are issued. If no final rules exist by January 18, the statute takes effect anyway — creating a scenario in which the law is operative but the implementing regulations are still in proposed form. This would leave issuers navigating statutory requirements without granular regulatory guidance, a compliance gap that multiple law firms, including Chapman and Cutler and Mayer Brown, have flagged in client advisories.
The regulatory framework has measurable implications for the two dominant issuers.
Circle (USDC — $74.2B supply). Circle obtained OCC approval on July 10, 2026, to establish Circle National Trust, a national trust bank initially focused on custody, with reserve management planned as a future capability. As a U.S.-chartered entity publishing monthly attestations and holding reserves in short-dated Treasuries, Circle's operational structure aligns closely with the proposed rules. According to adjusted transaction volume data, USDC carried approximately 70% of all stablecoin activity in the first half of 2026 — a metric that suggests institutional and commercial users already favor the more regulated instrument. Circle's stock (CRCL) has traded as a de facto proxy for U.S. stablecoin regulation since its public listing.
Tether (USDT — $183.4B supply). Tether, issued by Hong Kong-based iFinex, completed its first unqualified KPMG audit in August 2026. Despite this milestone, USDT's position under the GENIUS Act framework remains structurally different. As an offshore issuer, Tether would need either a qualifying foreign-issuer determination from the Treasury Department or a domestic licensing pathway to continue U.S. distribution under the Act's terms. As of September 29, no such determination has been issued.
The two stablecoins together command approximately $257.6 billion in combined supply — 85% of the $302.8 billion total market — but serve increasingly distinct markets. USDC dominates regulated, institutional, and commercial channels. USDT maintains its lead in total supply, driven by offshore trading, emerging-market remittances, and exchanges operating outside U.S. jurisdiction.
Treasury demand. A 1:1 reserve requirement concentrated in sub-93-day Treasuries would route significant demand into the short end of the government debt curve. The current $302.8 billion stablecoin supply represents approximately 5% of the outstanding T-bill market. If the stablecoin market continues its growth trajectory, this marginal demand pressure could compress T-bill yields — an outcome with second-order effects on money market fund returns and the Federal Reserve's own reverse repo facility.
Bank entry. The application framework for bank subsidiaries, with its 120-day auto-approval mechanism, creates a structured pathway for incumbent banks to enter stablecoin issuance. JPMorgan's existing JPM Coin infrastructure, designed for intra-bank settlement, could be adapted for a public payment stablecoin under the proposed rules. Several banks, including those granted digital-asset trust charters by the OCC, may view the subsidiary pathway as a means to compete directly with Circle and Tether.
Interest prohibition. The ban on paying yield or interest to stablecoin holders reinforces stablecoins' regulatory identity as payment instruments rather than investment products. This prohibition constrains business models like Ethena's USDe, which generates yield through basis-trading strategies. Under the Fed's proposal, any arrangement where a third party passes through reserve income to stablecoin holders would be presumptively prohibited, though the agency is soliciting comments on the exact boundary.
State vs. federal divide. The GENIUS Act permits state-regulated issuers to continue operating under state frameworks for stablecoins below $10 billion in circulation. Above that threshold, federal registration is mandatory. This dual structure preserves a runway for smaller issuers while channeling systemically significant issuers into the federal perimeter.
The Federal Reserve's proposed rules convert what was previously voluntary best practice into binding regulatory infrastructure. The combined effect of 1:1 reserves, 93-day maturity limits, 2% capital charges, two-day redemption windows, and weekly reporting makes the U.S. stablecoin framework among the most prescriptive in any jurisdiction — more detailed than the EU's MiCA in several dimensions.
The compressed timeline between the comment period closing (~November 23) and the statutory effective date (January 18, 2027) creates execution risk. If final rules are not issued before the statute takes effect, issuers face the unusual situation of operating under a live statute without completed implementing regulations. For Circle, already structured around compliance, this gap is manageable. For offshore issuers without a domestic regulatory pathway, it represents a narrowing window of ambiguity.
The economic question is not whether stablecoins will be regulated — that was settled when the GENIUS Act was signed in July 2025. The question now is whether three federal agencies can produce coherent, harmonized final rules before the clock runs out.