The U.S. Federal Reserve on Thursday proposed a new set of rules for issuers of dollar-backed cryptocurrencies known as stablecoins, beginning the process of putting into effect the federal regulatory framework created by last year’s GENIUS Act.
The proposal would establish requirements for payment stablecoin issuers supervised by the Fed, including rules requiring them to fully back their tokens with specified reserve assets such as short-term U.S. Treasury bills.
The move would bring stablecoin issuance further into the perimeter of the U.S. banking and financial regulatory system at a time when dollar-backed digital tokens are becoming more relevant to payments, crypto trading, and digital-asset markets.
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Under the proposed framework, stablecoin issuers would also face capital requirements designed to address certain credit and operational risks associated with issuing and managing the tokens.
The rules would extend beyond the companies directly issuing stablecoins. They would also establish guidelines for Fed-supervised banks that hold reserve assets on behalf of stablecoin issuers, potentially creating a clearer regulatory framework for the relationship between traditional banks and digital-asset companies.
The proposal would define the types of stablecoin-related activities that Fed-supervised banks could undertake and establish a tailored application process for banks seeking permission to issue their own payment stablecoins.
The Fed will accept public comments for 60 days after the proposal is published in the Federal Register.
Stablecoins Move Deeper Into The Regulated Financial System
Stablecoins are designed to maintain a relatively stable value, typically by maintaining a one-to-one relationship with a fiat currency such as the U.S. dollar. Issuers generally hold assets intended to support the value of tokens in circulation.
The reserve requirement is therefore central to the stability of the system. By requiring supervised issuers to fully back payment stablecoins with specified assets, the Fed is seeking to establish clearer rules around the assets that stand behind digital tokens and the risks those assets can create.
Short-term Treasury bills are among the reserve assets identified under the proposal. Such assets are highly liquid and can generally be converted into cash relatively quickly, making them more suitable for backing tokens that holders may expect to redeem on demand.
The proposed capital requirements address a different layer of risk. While reserves are intended to support the value of tokens, capital provides an additional buffer against certain losses and operational or credit risks associated with an issuer’s business.
Together, the requirements would move stablecoin regulation toward a model that more closely resembles traditional financial supervision while retaining rules tailored to the structure of digital assets.
Stablecoins sit between the traditional financial system and the cryptocurrency market. Thus, they can be used to move money between crypto platforms, settle digital transactions, and provide a dollar-denominated asset without relying directly on a conventional bank deposit for every transaction.
As their use expands, regulators have focused more on whether issuers can maintain liquidity and honor redemptions during periods of market stress.
Banks Face New Opportunities And Obligations
The Fed’s proposal also addresses the growing intersection between stablecoin issuers and traditional banks. Banks supervised by the Federal Reserve frequently provide custody, payments, settlement, and other services to financial companies. Under the proposed rules, banks holding stablecoin reserves would face specific guidelines governing those activities.
The proposal would also establish a process through which Fed-supervised banks could seek approval to issue their own stablecoins. That could eventually allow regulated banks to participate more directly in the stablecoin market, rather than limiting the sector to specialist cryptocurrency and payments companies.
The development could have broader consequences for competition in digital payments. Banks already possess established customer relationships, payment networks and compliance infrastructure, while stablecoin companies have focused on digital-native payment and settlement systems.
A regulatory framework that allows banks to issue stablecoins under defined conditions could therefore encourage more traditional financial institutions to enter the market. At the same time, reserve and capital requirements could raise the cost of operating for issuers that previously relied on less formal or less standardized arrangements.
The proposal comes as the United States attempts to establish a federal framework for stablecoins rather than leaving regulation to a patchwork of state-level rules and existing financial regulations. The GENIUS Act provides the statutory foundation for that framework, while the Fed’s proposal translates parts of the legislation into requirements applicable to institutions under its supervision.
The 60-day comment period gives banks, stablecoin companies, investors, and other industry participants an opportunity to challenge or support specific provisions before the rules are finalized.
For the Federal Reserve, one of the central issues will be balancing the potential benefits of stablecoins as a payment technology against the risks created when privately issued digital tokens become increasingly integrated with the banking and financial system.
If finalized substantially as proposed, the framework would make the quality and liquidity of stablecoin reserves, the financial strength of issuers, and the relationship between stablecoin companies and regulated banks important factors in the market. The result would be a stablecoin sector operating less like an unregulated corner of cryptocurrency markets and more like a regulated component of the broader dollar-based financial system.