Fed's Stablecoin Rules: 1:1 Reserves, Tiered Capital

The Federal Reserve wants every $1 of a bank-issued stablecoin backed by at least $1 in cash, short-term Treasury bills or other highly liquid assets. The central bank released two draft rules on Thursday, Sept. 24, 2026, laying out capital, redemption and application requirements for the banks it supervises that want to issue payment stablecoins under last year's GENIUS Act.

What the Fed actually proposed

The Federal Reserve Board is requesting public comment on two proposals related to establishing a regulatory framework for the payment stablecoin issuers it supervises under the GENIUS Act, it said in a Thursday (Sept. 24) press release. The agency released two notices of proposed rulemaking and will accept comment on them for 60 days after their publication in the Federal Register.

The first proposal covers the balance-sheet side of the business. Board-supervised payment stablecoin issuers would have to hold reserves entirely in permissible assets such as short-term Treasury bills and other high-quality, liquid holdings. Those permitted reserves could include U.S. dollars, Federal Reserve Bank balances, certain bank deposits, Treasury securities with 93 days or less remaining to maturity, qualifying repurchase agreements, and eligible investment funds. It would also establish standardized capital requirements to address credit and operational risks, set risk-management standards, and lay out rules for firms that safekeep the assets backing the tokens.

The second proposal is about market entry. It would create a tailored application process for Board-supervised banks seeking to issue payment stablecoins, requiring them to submit a business plan and financial information, and would establish procedures for appeals, hearings and final decisions. The GENIUS Act gives the Fed 120 days to decide complete bank applications. The publication of both proposals was approved in unanimous board votes.

Fed Governor Michael Barr framed the reserve and redemption pieces as the core of the exercise. "Stablecoins will only be stable if they can be reliably and promptly redeemed at par in a range of conditions," said Fed Governor Michael Barr, who oversees the Fed's supervision portfolio. Barr also said it will be useful to have public input on the proposal's provisions for reserve asset limitations and capital requirements, and whether the rule adequately addresses interest rate and foreign currency risks.

The numbers in the proposal

Why the capital charge matters, and what happens if a bank falls short

Under the Fed proposal, issuers would face an operational-risk capital charge equal to 2% of the first $20 billion in stablecoins outstanding, 1.5% of the next $30 billion and 1% of amounts above $50 billion, along with additional capital requirements tied to credit and operational risks. That charge is separate from the 1:1 reserve rule: it is capital the bank itself must hold against its own balance sheet, not the assets backing the tokens customers hold. The two protections are meant to work together. The reserve rule keeps the tokens redeemable at face value, and the capital charge is a buffer against operational failures or losses that could otherwise eat into those reserves.

The consequence for falling short is specific rather than open-ended. Stay deficient on capital long enough, and the proposed rules call for liquidating all reserve assets and redeeming the outstanding stablecoins. In practice, an under-capitalized issuer would not simply face a fine. As proposed, the rule would force it to wind down the stablecoin program and return money to token holders rather than continue operating in a weakened state.

Why the rules are arriving more than a year late

The two proposals implement the regulatory framework required under the GENIUS Act, the stablecoin law President Donald Trump signed in July 2025. The law's own effective date is the earlier of 18 months after that enactment date, or 120 days after regulators issue final rules implementing it. The GENIUS Act required the U.S. banking regulators and Treasury Department to put regulations in place by July of 2026, meaning the agencies are all well past that legal deadline, though they have made progress in recent months.

The Fed is not writing the rulebook alone. Its regulatory approach also echoes the Office of the Comptroller of the Currency's own proposal, which addressed the law's ban on issuers paying interest or yield for holding stablecoins. The OCC and the FDIC oversee different categories of banks and have been advancing their own parallel GENIUS Act rulemakings, so a bank's specific reserve, capital and application obligations will ultimately depend on which regulator supervises it.

What this means for readers and stablecoin holders

None of this is final yet. The 60-day comment period means the Fed can still revise the reserve list, the capital tiers or the redemption window before adopting a final rule, and banks, fintech firms and consumer groups are all likely to weigh in during that window. For a retail reader holding or considering a bank-issued stablecoin, the practical takeaway is that these specific protections do not yet exist in enforceable form. The GENIUS Act already requires 1:1 backing in law, but the Fed's proposal is what would translate that requirement into examinable capital levels, redemption deadlines and disclosure obligations for the banks it supervises. Until a final rule takes effect, the strength of any bank's stablecoin backing depends on that bank's current practices rather than a completed federal capital regime.