Key highlights:
- The Fed proposed two GENIUS Act rules: full reserve backing for payment stablecoins, plus a 120-day approval pathway for banks to issue stablecoins via subsidiaries
- Stablecoins won’t become FDIC-insured deposits regardless of who issues them, as the framework focuses on the issuer, reserve assets, and how they’re managed
- Bank of America, Citi, Goldman Sachs, and 18 others committed to a joint stablecoin, with GENIUS Act issuer restrictions taking effect Jan. 18, 2027
The GENIUS Act is pushing stablecoins closer to the U.S. banking system as the Federal Reserve lays out new rules for who can issue digital dollars and what must back them.
The Federal Reserve is beginning to fill in the rules for the U.S. stablecoin market, and its proposals could determine how both existing issuers and banks operate under the new federal framework.
The central bank said Thursday that it is seeking public comment on two proposals.
One would establish operating requirements for payment stablecoin issuers under the Fed’s supervision, while the other would create a pathway for insured state member banks to enter the market through subsidiaries.
The first proposal starts with one of the most important questions in the stablecoin market: what actually backs each dollar token in circulation?
Fed wants stablecoins fully backed by liquid assets
Under the proposed framework, payment stablecoins would have to be fully backed by permissible reserve assets. The Fed identified short-term U.S. Treasury bills and other high-quality, liquid assets among those that could qualify.
The idea is straightforward. If an issuer has $10 billion worth of stablecoins in circulation, it would need sufficient eligible assets to support those tokens when holders want to redeem them for dollars.
That requirement would place limits on how issuers use their reserves and is intended to reduce the risk that an issuer could face a liquidity problem during heavy redemption activity.
The Fed would also introduce standardized capital requirements to address credit and operational risks linked to stablecoin activities. Firms under its supervision that safeguard stablecoin reserves would face additional requirements governing how those assets are managed.
The proposals would also clarify which stablecoin-related activities banks supervised by the Fed could conduct.
Notably, the reserve rules also draw an important line between payment stablecoins and traditional bank deposits.
A stablecoin backed by Treasury bills or other permitted assets would not become an FDIC-insured bank deposit simply because a bank or regulated financial institution issues it.
Instead, the regulatory framework would focus on the issuer, the assets backing the tokens, and how those reserves are held, managed, and protected.
That distinction becomes particularly important as banks begin looking for a way into the stablecoin business.
How banks could get approval to issue stablecoins under GENIUS ACT
The Fed’s second proposal focuses on insured state member banks that want to issue payment stablecoins through subsidiaries.
Rather than allowing a bank to begin issuing stablecoins automatically, the proposed framework would require it to seek approval from the Federal Reserve through its appropriate Reserve Bank.
The application would need to explain how the proposed stablecoin operation would work, including the bank’s business plan, financial condition, and other information needed by regulators to assess the subsidiary.
The Fed would then have 30 days to determine whether the application was substantially complete and tell the bank what additional information, if any, was required.
Once the application was considered complete, the GENIUS Act provided the Fed with 120 days to make a decision.
If the regulator does not act within that period, the application would be deemed approved under the law. However, that timeline could change if there are material changes to the proposed issuer’s business plan, ownership structure, or financial condition.
Why major banks are racing into stablecoins as U.S. rules take shape
The proposal comes as major financial institutions move deeper into the stablecoin market and U.S. regulators work to establish rules for the industry.
On Sept. 1, Bank of America, Citi, Goldman Sachs, and 18 other financial institutions reportedly committed to creating a stablecoin company that would issue a dollar-denominated token as early as the first half of 2027.
The consortium said it plans to comply with the GENIUS Act, although its announcement did not indicate whether it would use the specific Federal Reserve application process outlined in Thursday’s proposal.
The Fed’s action is part of a broader rulemaking process following the passage of the GENIUS Act.
The legislation, introduced by Sen. Bill Hagerty in 2025, passed the Senate 68-30 on June 17 and the House 308-122 on July 17 before President Donald Trump signed it into law on July 18.
Other agencies are also developing rules under the legislation.
The Treasury Department is working on definitions covering when payment stablecoins are issued, offered, or sold in the U.S., while the Office of the Comptroller of the Currency is developing separate rules for issuers under its authority.
The timing is significant because the GENIUS Act sets Jan. 18, 2027, as the expected effective date for its main issuer restrictions.
The Fed’s proposals are not final rules, and the central bank will accept public comments for 60 days after publication in the Federal Register.
Source:: Federal Reserve Proposes GENIUS Act With New Stablecoin Rules