Fed proposes stablecoin rules under GENIUS Act

The Federal Reserve on September 24 proposed two rules to implement parts of the GENIUS Act, setting out reserve, capital and risk-management requirements for supervised payment stablecoin issuers and a process for insured state member banks seeking approval to issue stablecoins through subsidiaries. The proposals are not final and are open to public comment. Under the issuer proposal, covered firms would have to fully back outstanding payment stablecoins with permitted reserve assets. The Fed identified short-term U.S. Treasury bills and other high-quality, liquid assets as examples. The draft also would establish standardized capital requirements addressing credit and operational risks, set risk-management standards and cover firms supervised by the Fed that safeguard stablecoin reserves. A separate proposal would require an insured state member bank to apply to the Fed before a subsidiary could issue payment stablecoins. The bank would submit a business plan, financial information and other material for the Fed’s review. The proposal would also clarify which stablecoin-related activities banks under Fed supervision may undertake.