U.S. Federal Reserve moves on proposals to implement GENIUS Act for stablecoins
RWA Signal Insight
StablecoinsThe U.S. Federal Reserve has introduced two proposed rules to implement the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, marking a significant step toward formalizing stablecoin oversight. These proposals establish strict capital and reserve requirements to ensure stablecoins remain redeemable at par during periods of market stress. Furthermore, the rules outline specific procedures for Fed-regulated banks to issue their own stablecoins, requiring detailed business plans and financial documentation. A critical component of the proposal aligns with the Office of the Comptroller of the Currency by prohibiting issuers from paying interest or yield on stablecoin holdings, with only narrow exceptions for incentive programs. While the agencies are currently past the original July 2026 legal deadline, these proposals initiate a 60-day public comment period to refine the regulatory framework. This development is vital for the RWA market as it provides the legal clarity necessary for stablecoins to function as reliable, regulated settlement assets within the traditional banking system. By standardizing reserve requirements and issuer conduct, the Fed aims to integrate stablecoins into the broader financial infrastructure while mitigating systemic risks.
Key points
- Fed proposed two rules to implement the GENIUS Act for stablecoin issuer oversight.
- Proposals mandate full backing by liquid assets and prohibit interest payments on stablecoins.
- Regulated banks must submit detailed business plans to receive authorization for stablecoin issuance.
- New rules are subject to a 60-day public comment period before finalization.
Background
The GENIUS Act is a legislative framework designed to establish comprehensive federal oversight for U.S. dollar-pegged stablecoins. It mandates that issuers maintain high-quality, liquid reserves to ensure parity and requires federal agencies to coordinate on licensing and operational standards for banks and non-bank issuers. The act serves as the primary regulatory vehicle for integrating stablecoins into the U.S. financial system.