Fed proposes stablecoin rules: 2% capital on the first $20 billion, reserves in Treasuries of 93 days or less

The Federal Reserve Board on Thursday asked for public comment on two proposals that would set the rules for stablecoin issuers it supervises under the GENIUS Act, the stablecoin law passed in July 2025. The Fed's release covers reserves, capital, custody and a new application process for banks that want a subsidiary to issue a dollar token. Comments close 60 days after the proposals are published in the Federal Register.

The release itself is short. The detail is in the Board staff memo and the Federal Register notice behind it, which runs to 254 numbered questions for commenters.

What the Fed is proposing

• One-to-one backing at all times. Reserves must be worth at least the face value of the coins outstanding, held separately, and limited to cash, Fed balances, demand deposits at insured banks, Treasuries with 93 days or less to maturity, overnight repo backed by Treasuries, funds that hold only those assets, and tokenized versions of some of them.
• Two business days to redeem. Issuers must publish a redemption policy with a period no longer than two business days, though the Board could extend it under stress.
• No yield, including through partners. The law bans paying interest just for holding a stablecoin. The proposal adds a presumption that an issuer is breaking that rule if it pays an affiliate or "related third party" which in turn pays yield to holders of its coins. The issuer can try to rebut it. The Fed says this follows the approach the OCC proposed in March.
• Hard deadlines on capital. An issuer that misses its capital minimum at quarter-end must file a plan. If it is still short a quarter later, it must liquidate its reserves and redeem every coin outstanding.

The number behind the number: what the capital charge costs

The operational risk charge, set out in a footnote to the staff memo, is graduated: 2.0% of the first $20 billion of coins outstanding, 1.5% of the next $30 billion and 1.0% above $50 billion. On top of that sits a charge of 25% of three-year average revenue from anything other than reserves, and a 2% charge on reserves held as uninsured deposits or undercollateralized repo.

The useful comparison is against what the reserves earn. Stablecoin issuers make their money on the Treasury bills behind the coins, and the 3-month bill yielded 4.19% at Wednesday's close, according to Treasury. Using that as a stand-in for gross reserve income, our arithmetic:

That is before any charge on non-reserve revenue, and before operating costs. The tiering is a deliberate advantage for scale: the Fed says operational risk "may not increase linearly" with size. For a bank weighing whether to launch its own coin, the entry cost is steepest at the small end, where a new issuer will start.

The proposal also closes a loophole for parent banks. A bank or holding company that consolidates an issuer would have to deduct the issuer's minimum capital from its own common equity tier 1, so the same dollars cannot count twice.

What the bond market should notice

This week's selloff has been at the long end: the 30-year Treasury yield closed at 5.40% on Wednesday and traded above 5.44% on Thursday, its highest since 2004, as we reported this morning. Stablecoin growth is sometimes pitched as a new source of demand for U.S. debt. Under this proposal, that demand is capped at 93 days. A bigger stablecoin market buys bills, not the 10- and 30-year bonds that set mortgage and business loan rates.

What is not decided

Governor Michael Barr backed the proposal but flagged two gaps: whether the rule deals with interest rate and foreign currency risk, and a standard that would stop the Fed from acting on an anti-money-laundering problem unless it is "significant or systemic." He said he wants the second one addressed in any final rule.

Timing matters too. The law takes effect on Jan. 18, 2027, or 120 days after regulators issue final rules, whichever comes first. With a 60-day comment period still to run, the Fed's final version will land close to that date.

Banks are already using stablecoins behind the scenes. SoFi said this week it is moving its whole card program, more than $25 billion in expected annual volume, to settlement with Mastercard using its own SoFiUSD token, Cointelegraph reported. Thursday's rules cover only issuers the Fed supervises; the OCC, FDIC and NCUA have each proposed their own versions under the same law. For background on the stalled market-structure bill, see our piece on the Clarity Act's defeat.

Sources: Federal Reserve Board press release, staff memos and Federal Register notices (Sept. 24, 2026); statement by Governor Barr; U.S. Treasury daily yield curve; Cointelegraph. Capital and income figures are our own calculations from the proposal's stated rates. This is market information, not investment advice.