The Federal Reserve has released two proposed rulemakings that would define how the stablecoin issuers it supervises must operate under the GENIUS Act. Together, the proposals would set standards for reserve backing, capital, risk management, and custody, while also laying out a formal approval path for certain banks that want to issue stablecoins.

The central bank said Board-supervised payment stablecoin issuers would need to maintain full backing with permissible safe and liquid assets, including short-term Treasury bills. Public comments on both proposals will be accepted until 60 days after they are published in the Federal Register.

Two proposals under the GENIUS Act

The first proposal focuses on the operating rules for Board-supervised payment stablecoin issuers. Under that framework, issuers would be required to back their tokens entirely with permitted reserve assets and comply with standardized requirements covering capital, risk management, and the safekeeping of reserves.

The second proposal is aimed at Board-supervised banks that want to issue stablecoins. It would establish a tailored application process rather than a general operating standard alone, creating a specific route for those institutions to seek approval from the Federal Reserve.

Reserve backing and operational safeguards

At the center of the Fed’s approach is the requirement that stablecoins be fully reserved with assets viewed as safe and liquid. The proposal specifically cites short-term Treasury bills as an example of permissible backing assets.

Beyond the reserve composition itself, the framework would also require issuers to hold capital against the risks created by their operations. It would pair that with risk-management expectations and rules governing how reserves are held, reflecting a bank-style supervisory model for the entities under the Board’s authority.

How bank applicants would be reviewed

For banks supervised by the Board, the Fed’s second proposal would create application requirements tied to a planned stablecoin issuance. According to the proposal, applicants would need to provide a business plan and financial information as part of that process.

The draft framework would also spell out procedures for appeals and hearings, giving institutions a more defined process if disputes arise during review. The proposal is designed specifically for Board-supervised banks, rather than the broader universe of stablecoin firms.

Part of a wider federal rollout

The Federal Reserve’s move is described as part of a broader, multi-agency implementation of the GENIUS Act that also involves the Office of the Comptroller of the Currency and the Treasury Department. The Fed’s piece of that rollout centers on reserve integrity, operational resilience, and supervisory review for the issuers and banks under its jurisdiction.

In practical terms, the proposals reflect two core ideas in the Fed’s framework: that payment stablecoins should be redeemable at face value and that the firms issuing them should be subject to oversight comparable to other tightly supervised financial activities.

What comes next

The proposals are not yet final rules. They have been opened for public comment, and the comment window will remain open for 60 days after publication in the Federal Register.

Stablecoins are blockchain-based tokens typically pegged to a reference asset such as the U.S. dollar, with reserves intended to support redemption. The next confirmed step in the process is the formal comment period, after which the Federal Reserve can consider feedback before deciding whether and how to finalize the rules.

Source: decrypt.co