The Federal Reserve Board on Thursday proposed reserve, capital and risk management rules for the stablecoin issuers it supervises under the GENIUS Act, along with an application process for state member banks that want to issue stablecoins through a subsidiary.

Comments on both proposals are due 60 days after they are published in the Federal Register.

The rules would cover subsidiaries of insured state member banks approved to issue stablecoins, and uninsured state-chartered issuers with at least $10 billion in stablecoins outstanding that move under Fed oversight, according to a staff memo to the Board.

Reserves and Capital

Issuers would need reserves worth at least the par value of their outstanding tokens at all times. Eligible reserves include cash, Fed balances, demand deposits, Treasuries maturing in 93 days or less, certain overnight repo and reverse repo, funds invested only in those assets, and tokenized versions of some of them. Redemptions would have to be completed within two business days, unless a safe harbor applies.

The operational risk capital charge would scale down as an issuer grows: 2% on its first $20 billion in stablecoins, 1.5% on the next $30 billion and 1% on anything above $50 billion. A second charge would equal 25% of an issuer’s three-year average revenue from activities outside its reserves. Reserves held as uninsured deposits or undercollateralized reverse repos would carry a separate 2% requirement.

An issuer that misses its capital minimum at a quarter’s end would have to file a plan. If it is still short at the end of the next quarter, it would have to liquidate its reserves and redeem its stablecoins.

Third-Party Yield Deals

The GENIUS Act bars issuers from paying interest or yield solely for holding a stablecoin. Mirroring a proposal from the Office of the Comptroller of the Currency, the Fed would presume an issuer is paying prohibited yield if it pays an affiliate or a “related third party” that in turn pays holders of its stablecoins. That group includes firms paying yield as a service for the issuer and white-label partners. Issuers could rebut the presumption in writing.

Stablecoin rewards were a central fight in the Clarity Act, where banks sought to curb them before the bill stalled in the Senate this month.

Barr Flags Money Laundering Standard

Governor Michael Barr backed the proposal. “I am encouraged by provisions for reserve asset limitations, as well as transparent and standardized capital requirements,” Barr said in a statement.

Barr said he wants a final rule to address a provision that would let the Fed act on an issuer’s anti-money laundering lapse only if it is “significant or systemic.” Barr said he is concerned the standard “may have unknown effects on the Board’s ability to effectively substantiate that an institution establishes and maintains compliant programs.”

The GENIUS Act takes effect on Jan. 18, 2027, or 120 days after regulators issue final rules, whichever comes first.

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