New Stablecoin Regulations
Federal Reserve Proposes Strict Reserve and Capital Rules for Payment Stablecoins
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The Fed’s bank-issuer application proposal would also set procedures for appeals, hearings and final decisions on applications—details not mentioned in the summary.
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The Fed’s proposals follow an earlier June effort by the Fed and other federal banking regulators to require permitted payment stablecoin issuers to maintain customer-identification programs and treat them as financial institutions under the Bank Secrecy Act.
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In comments on a related GENIUS Act rulemaking on customer identification, the Defense Credit Union Council urged regulators to keep requirements risk-based and operationally workable, avoid duplicating existing obligations for regulated financial institutions, and explicitly include credit unions in the financial-institution exclusion.
The Federal Reserve has proposed two major rules to regulate payment stablecoins under the GENIUS Act framework FXStreet. The proposals require stablecoin issuers to fully back their tokens with liquid assets like short-term Treasury bills and set strict capital and risk-management standards BigGo Finance. The Fed is seeking 60 days of public comment after publishing the rules in the Federal Register.
One proposal creates a formal approval process for banks wanting to issue stablecoins, requiring detailed business and financial information Yahoo Finance. The other sets rules for how banks can hold stablecoin reserves and which related activities they may conduct. Together, these rules aim to prevent credit risks and operational failures in the stablecoin market.
Full Backing Requirements Protect Stablecoin Holders
Under the Fed's proposal, stablecoin issuers must hold permitted liquid assets that fully back every token in circulation BigGo Finance. Permitted assets include short-term Treasury bills and other high-quality reserves. This requirement ensures stablecoins maintain their $1 peg and that holders can always redeem tokens at face value.
Capital Rules Address Credit and Operational Risks
The Fed proposes tiered capital charges based on the type of assets backing stablecoins BigGo Finance. Issuers must also establish risk-management systems to detect fraud, cyber attacks, and other operational threats. These safeguards protect both stablecoin holders and the wider financial system from sudden collapses caused by mismanagement or fraud.
New Approval Process for Bank Stablecoin Issuers
Banks seeking Fed approval to issue stablecoins must submit applications with detailed business plans and financial information Yahoo Finance. The Fed will review these applications using a formal process that includes procedures for appeals and hearings. This structured approach ensures only well-capitalized, well-managed banks can enter the stablecoin market FXStreet.
Stablecoin Rules Follow Earlier Bank Secrecy Requirements
In June, the Fed and other federal banking regulators proposed earlier rules requiring stablecoin issuers to maintain customer-identification programs CryptoNews. Those rules treat stablecoins as financial instruments under the Bank Secrecy Act. The new proposals build on that foundation by adding capital, redemption, and approval rules to create a complete regulatory framework.
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