On September 24 local time, the U.S. Federal Reserve Board released two proposed rules under the GENIUS Act and opened them for public comment. The proposals would require issued stablecoins to be fully backed by permitted reserve assets while also requiring separate capital to absorb losses arising from credit risk and operational incidents.
The reserve and capital standards would apply directly to issuers supervised by the Federal Reserve. These include approved subsidiaries of FDIC-insured state member banks and state-chartered, uninsured depository institutions that move into Federal Reserve supervision once their outstanding issuance reaches at least $10 billion.
Permitted reserve assets would include U.S. dollar cash, balances at Federal Reserve Banks, demand deposits at insured depository institutions, and U.S. Treasury securities with no more than 93 days remaining to maturity. They would also include overnight repurchase agreements backed by Treasuries, eligible investment funds, and tokenized forms of certain assets. The fair value of the reserves would have to remain at least equal to the face value of the stablecoins outstanding at all times, and issuers would have to manage concentration risk involving particular financial institutions or counterparties. Redemptions would generally have to be completed within two business days of a request.
Base capital for operational risk would be calculated at 2% of the first $20 billion in outstanding issuance, 1.5% of the next $30 billion, and 1% of the amount above $50 billion. Additional capital would apply if the issuer earns income from businesses other than reserve management. The proposal would add 25% of the issuer's average annual income from the previous three years to the base amount, then adjust the total to reflect its history of operational losses. Separate capital would also be required for credit risk in reserve assets. Uninsured deposits would carry a 2% charge, while reverse repurchase agreements used to lend funds against Treasury collateral would carry a 2% charge on any collateral shortfall remaining after valuation adjustments.
The second proposal sets out the approval process for an FDIC-insured state member bank seeking to issue stablecoins through a subsidiary. It would require a business plan and financial information and would also establish procedures for challenging a denial and requesting a hearing.
The comment period for both proposals will run for 60 days after publication in the Federal Register. They remain proposals and have not been finalized.