Fed Unveils Proposed Stablecoin Framework Under GENIUS Act

The Federal Reserve Board requested public comment on Thursday regarding two proposed regulatory frameworks under the GENIUS Act to establish reserve, capital, and application procedures for payment stablecoin issuers.

The proposals mark a formal step toward federal oversight for digital asset issuers operating within the U.S. banking system, introducing standardized risk management requirements and formal application pathways for institutions seeking to issue stablecoins.

"Stablecoins must remain redeemable at par during periods of market strain," said Michael S. Barr, Federal Reserve Governor, in a statement regarding the new regulatory measures.

Reserve Backing and Capital Standards

The first proposed framework would mandate that Board-supervised payment stablecoin issuers fully back their digital tokens with approved, high-quality liquid assets. Permissible reserves under the draft rules include short-term U.S. Treasury bills and other low-risk instruments designed to prevent the liquidity mismatches that have historically threatened digital asset valuations during broader financial market selloffs.

Alongside reserve mandates, the framework establishes standardized capital requirements and operational risk management standards. These rules align stablecoin issuance with traditional banking sector safety and soundness expectations, protecting retail and institutional holders from issuer insolvency.

Application and Review Procedures

The second proposal establishes a tailored application process for Board-supervised banks wishing to issue payment stablecoins. Prospective issuers must submit comprehensive business plans and detailed financial information for regulatory evaluation.

The administrative process also creates formal structures governing appeals, administrative hearings, and final supervisory determinations. The public comment period for both proposals will remain open for 60 days following publication in the Federal Register.

Enforcement and Anti-Money Laundering Challenges

While outlining the supervisory roadmap, Governor Barr raised concerns regarding potential limitations on enforcement capabilities concerning bank anti-money laundering (AML) deficiencies. The commentary highlights ongoing regulatory tension between fostering digital asset innovation and maintaining rigorous financial crime controls within decentralized or hybrid issuance models.

The debate over stablecoin oversight mirrors legislative efforts to integrate digital assets into traditional financial plumbing. As regulatory scrutiny deepens across global jurisdictions, frameworks like the GENIUS Act proposals help bridge the gap between private-sector cryptographic tokens and central bank safety nets.