The Federal Reserve Board has initiated a public comment period regarding two distinct proposals designed to establish a regulatory framework for Board-supervised payment stablecoin issuers in compliance with the GENIUS Act. The first proposal mandates that these issuers fully back their stablecoins with permissible reserve assets, specifically citing short-term Treasury bills and other high-quality, liquid instruments. This rule also introduces standardized capital requirements to mitigate credit and operational risks associated with stablecoin activities, alongside specific risk management standards. Additionally, the proposal addresses firms responsible for safeguarding the assets backing these stablecoins and clarifies the permissibility of such activities for Board-supervised banks.
The second proposal establishes a tailored application process for Board-supervised banks seeking approval to issue payment stablecoins. Applicants must submit comprehensive business plans and financial information as part of this procedure. The framework also defines processes for appeals, hearings, and final determinations related to these applications. The public comment period is set to close 60 days after the publication of these notices in the Federal Register.
This regulatory move signifies a critical step toward formalizing the operational boundaries for traditional banking institutions entering the digital asset space. By mandating full backing with high-quality liquid assets like short-term Treasury bills, the Federal Reserve aims to eliminate the fractional reserve risks that have historically plagued unregulated stablecoin projects. The introduction of standardized capital requirements and specific safeguards for custodial firms indicates a focus on systemic stability, ensuring that the integration of stablecoins into the broader financial infrastructure does not introduce new vulnerabilities to Board-supervised entities.
