The Federal Reserve has proposed a supervisory framework for payment stablecoin issuers under its jurisdiction, setting out how full backing, redemptions, capital and custody would work under the GENIUS Act.
The September 24 package consists of two notices of proposed rulemaking. The main proposal would apply to Board-supervised permitted payment stablecoin issuers and certain firms that safeguard stablecoins or reserve assets. A companion proposal would govern applications by insured state member banks seeking approval for a subsidiary to issue payment stablecoins.
Neither proposal is final. The comment period will close 60 days after publication in the Federal Register; the Federal Reserve announcement did not provide a calendar deadline.
Backing would be measured at fair value
The main proposal would require an issuer to hold identifiable reserve assets whose total fair value equals or exceeds the value of its outstanding stablecoins at all times. Eligible assets would be limited to categories permitted by the GENIUS Act, including U.S. currency, balances at a Federal Reserve Bank, qualifying deposits, short-term Treasury bills, certain repurchase agreements and eligible government money market funds.
Reserve assets generally would have to be segregated from the issuer’s other property and unavailable to satisfy claims from other creditors until token holders had been redeemed at par. The proposal would also restrict issuers from pledging, reusing or rehypothecating reserve assets, subject to limited permitted uses.
For payment companies evaluating a stablecoin integration, that structure makes the backing claim an operational issue rather than a marketing label. Treasury teams would need to understand asset eligibility and valuation, while legal and risk teams would need evidence that custody and account arrangements preserve segregation.
Monthly reports would expose reserve composition
A Board-supervised issuer would publish a monthly report stating the number of outstanding stablecoins and the fair value and composition of its reserves. The disclosure would include the average tenor and geographic location of custody for each reserve category.
The issuer’s chief executive and chief financial officer, or people performing equivalent functions, would certify the report’s accuracy to the Board. For wallets, exchanges and payment processors, those disclosures could provide a more consistent basis for issuer due diligence. They would not remove the need to assess liquidity, concentration and counterparty risk.
Redemptions could take no more than two business days
The proposal would require issuers to publish redemption policies and generally complete a redemption for fiat currency within two business days of the request. The Federal Reserve describes that period as an outer limit, meaning an issuer could offer faster redemption.
Limited safe harbors would apply when more time is needed for legally required customer identification, sanctions or anti-money-laundering checks, or when a delay is outside the issuer’s control. The rule therefore would not turn every delayed transaction into an automatic violation, but it would require issuers to distinguish a permitted exception from routine liquidity or operational friction.
The two-day standard would matter beyond the issuer. Payment platforms that promise rapid availability may still depend on the issuer’s redemption process, its banking relationships and the liquidity of reserve assets. Product terms and treasury arrangements would need to reflect the difference between onchain transfer speed and conversion into bank money.
Capital would cover risks outside the reserve pool
The Federal Reserve proposes capital requirements alongside the one-to-one reserve test. The framework would account for credit and counterparty risk in reserve assets, financial risk in non-reserve assets and operational risk associated with issuing and redeeming tokens and managing reserves.
That separation is important. Reserves are intended to meet token holders’ redemption claims, while capital is intended to absorb losses from exposures and operating failures. Full backing alone does not eliminate technology, custody, fraud, compliance or third-party risk.
If an issuer failed to meet reserve or capital requirements, the proposal could require a remediation plan and, under specified conditions, liquidation of reserves and redemption of outstanding tokens. This would connect recurring reporting to an escalation process rather than treating it only as public disclosure.
Custody rules would reach service providers
The package would impose controls on Board-supervised firms that safeguard reserve assets, payment stablecoins used as collateral or associated private keys. Covered custodians would need to segregate customer assets, maintain possession or control and apply safeguards and internal controls to sub-custody arrangements.
The proposal also expects issuers to manage risks created by third-party relationships, including providers supporting smart-contract functions, private-key custody, blockchain monitoring and tokenized reserve assets. Payment firms supplying those components should not read the proposal as applying only to the entity whose name appears on the token.
State member banks would get a defined application route
The companion proposal would require an insured state member bank to provide a business plan, financial information and details about governance, risk management, compliance and operations when seeking approval for an issuing subsidiary.
The Board would have 120 days to decide an application after it is deemed substantially complete. The proposal also sets out procedures for appeals, hearings and final determinations following a denial.
This creates a proposed regulatory route for bank-affiliated issuance, not permission for any bank to issue a stablecoin. For the payments industry, the immediate task is to assess whether reserve operations, redemption service levels, custody contracts and vendor oversight could produce the evidence that the framework would demand if adopted.