Federal Reserve Proposes New Regulatory Framework for Payment Stablecoins Under GENIUS Act

The Federal Reserve Board has opened public comment on two major proposals to regulate payment stablecoin issuers under the GENIUS Act. For fintech professionals, this represents a critical step toward formalizing the integration of digital assets into the traditional banking system, establishing clear rules for reserve backing, capital requirements, and bank-led issuance.

What was announced

The Federal Reserve Board is seeking feedback on a dual-pronged regulatory framework designed to bring payment stablecoins under formal oversight. The first proposal focuses on the operational and financial stability of issuers. It mandates that any Board-supervised payment stablecoin issuer must fully back their digital assets with specific permissible reserve assets. These assets are restricted to high-quality, liquid instruments, such as short-term Treasury bills and other similar assets. Beyond reserves, this proposal introduces standardized capital requirements aimed at mitigating credit and operational risks inherent in payment stablecoin activities. It also sets out risk management standards and establishes rules for firms responsible for the safekeeping of assets backing these coins, ensuring that the underlying value is protected and accessible. Crucially, it provides clarification for Board-supervised banks on the permissibility of engaging in stablecoin and related activities, removing much of the legal ambiguity that has previously hindered traditional bank participation in the space.

The second proposal outlines the administrative pathway for entry into this market. It establishes a tailored application process for Board-supervised banks seeking to issue payment stablecoins. Applicants will be required to provide comprehensive documentation, including a detailed business plan and financial information that demonstrates their ability to manage the unique risks of digital ledger technology. To ensure transparency and due process, the proposal also creates a formal structure for appeals, hearings, and final determinations regarding these applications. The public has a 60-day window to submit comments following the publication of these proposals in the Federal Register.

"The first proposal would require that Board-supervised payment stablecoin issuers fully back their stablecoins with certain permissible reserve assets, such as short-term Treasury bills and certain other high-quality, liquid assets."

The Federal Reserve Board.

The companies involved

The Federal Reserve Board serves as the central governing body of the Federal Reserve System, the central bank of the United States. Tasked with conducting the nation's monetary policy and supervising banking institutions, the Board plays a pivotal role in maintaining the stability of the financial system. In the context of emerging financial technologies, the Board has increasingly focused on how digital assets and private-sector "money" like stablecoins interact with the regulated banking sector. FF News has tracked this evolution across 24 separate reports, documenting the central bank's shift toward active digital asset oversight.

Operating from its headquarters in Washington, D.C., the Board oversees the operations of the 12 regional Reserve Banks and shares responsibility for the supervision of a wide array of financial institutions, from small community banks to global systemically important banks. Its involvement in the GENIUS Act framework marks a significant transition from observational oversight to active regulation of the stablecoin market. By setting standards for reserves and capital, the Board is asserting its role in ensuring that digital innovations do not compromise the safety and soundness of the broader monetary environment. This move aligns with the Board's historical mandate to provide a safe and flexible financial system.

What FF News has reported before

FF News has closely followed the Federal Reserve's expanding influence on modern payment infrastructure and the evolving regulatory landscape for US banking. We previously covered the expansion of immediate payment solutions when PNC Bank Expands Immediate Payments Solutions by Joining the FedNow® Service, highlighting the central bank's role in real-time gross settlement. The regulatory environment for bank charters has also been a point of focus, notably with Itaú Unibanco Secures Preliminary OCC Approval for US National Bank Charter and the significant move where Chime to Acquire Stride Bank for $590M: Neobank Giant Secures National Charter. Additionally, the intersection of bank intelligence and data was explored in our report on how KlariVis Expands C-Suite with New Chief Data and AI Officers to Scale Bank Intelligence.

What this means

This move by the Federal Reserve signals the end of the "wild west" era for stablecoins in the United States. By mandating full backing with high-quality assets like Treasury bills, the Fed is effectively treating payment stablecoins as a narrow form of banking. This puts immense pressure on non-bank issuers who may struggle to meet the rigorous capital and risk management standards typically reserved for depository institutions. The industry must now grapple with whether these requirements will stifle innovation or provide the institutional legitimacy needed for mass adoption. The tailored application process suggests a desire to keep stablecoin issuance within the perimeter of supervised banks, raising questions about the future viability of independent, unregulated issuers in the domestic market.