Stablecoin Regulation Is Filling In Agency by Agency

The federal rulebook for payment stablecoins is being written by three different agencies on three different clocks, and until this week the Federal Reserve was the one still holding a blank page. On September 24, the Fed finally put out its reserve and capital requirements for Board-supervised stablecoin issuers, seven months after the Treasury Department and the FDIC published their own pieces of the same law. The gap says as much about how the GENIUS Act is actually being implemented as anything in the new proposal itself.

What the Fed Proposed

The Federal Reserve Board’s two proposals, released for public comment on September 24, cover the parts of the Guiding and Establishing National Innovation for U.S. Stablecoins Act that fall to the Fed as prudential supervisor of state member banks. The first requires Board-supervised payment stablecoin issuers to fully back every coin with permissible reserve assets, primarily short-term Treasury bills and other high-quality liquid instruments, and sets standardized capital requirements to cover the credit and operational risk of running a stablecoin program. It also lays out risk management standards and custody rules for the assets held as backing, and clarifies which stablecoin-related activities a Board-supervised bank may undertake in the first place.

The second proposal is procedural but consequential: a tailored application process for banks that want to issue payment stablecoins, requiring a business plan and financial documentation, plus a defined path for appeals, hearings and final determinations when the Board says no. Comments on both proposals are open for 60 days after they run in the Federal Register.

Governor Michael Barr, who has been the Board’s most consistent public voice on stablecoin risk, framed the stakes plainly in a statement issued alongside the proposals. “Stablecoins will only be stable if they can be reliably and promptly redeemed at par in a range of conditions,” he wrote, noting that includes “during market stress, when pressure can be put on the value of even otherwise liquid government debt, and during episodes of strain on the individual issuer or its related entities.” Barr said he was encouraged by the reserve-asset limits and the standardized capital requirements, but flagged an unresolved fight over anti-money-laundering enforcement: language elsewhere in the Board’s rulemaking agenda would bar supervisory or enforcement action over an AML deficiency unless it rises to a “significant or systemic” issue, a bar Barr said could blunt the Board’s ability to actually hold issuers to their compliance programs.

How the Reserve and Capital Rules Actually Work

The mechanics matter because they determine whether a bank’s stablecoin program looks like a narrow-bank deposit product or a leveraged trading book. Under the Fed’s proposal, every dollar of a payment stablecoin in circulation must be matched, in practice, by a dollar of permissible reserve assets held on the issuer’s books, primarily short-term Treasury bills, reverse repo backed by Treasuries, and insured bank deposits. That structure is a close cousin of the SEC’s Rule 2a-7, the regulation that has governed money-market mutual funds since the 1980s and was rewritten twice, after the 2008 Reserve Primary Fund “breaking the buck” episode and again after the March 2020 liquidity freeze, specifically because thin, unstable reserve composition rules let a fund’s net asset value slip below par under stress. The Fed’s proposal is, in effect, importing that lesson directly into stablecoin regulation before a comparable failure happens on U.S. soil, rather than after.

The capital requirements layer on top of the reserve rule, not instead of it. Reserves cover the asset side, whether the issuer holds enough safe, liquid collateral to redeem every outstanding coin. Capital covers the liability side, whether the issuing bank itself has enough loss-absorbing equity to survive an operational failure, a cyberattack, a mismanaged custody relationship, or a legal dispute with a partner, without that failure cascading into the reserve assets backing the coin. Custody and safekeeping rules in the proposal go further still, requiring that reserve assets be held in a manner that keeps them legally separate from the issuer’s general balance sheet, so that a bank’s own insolvency does not automatically drag stablecoin holders into a bankruptcy proceeding alongside the bank’s other creditors.

None of that is conceptually new to bank regulation. What is new is applying it to an instrument designed to move continuously, twenty-four hours a day, across blockchains the Fed does not operate and cannot freeze. A money-market fund can suspend redemptions if its board decides the fund is under stress. A payment stablecoin that cannot be “reliably and promptly redeemed at par,” in Barr’s words, loses the one property that makes it useful as a payment instrument in the first place, so the Fed’s proposal has comparatively little room to build in the kind of circuit breakers that fund regulators rely on.

The Rest of the Rulebook Was Already Written

What makes the Fed’s entry notable is how late it is relative to its co-regulators. The FDIC approved its own GENIUS Act proposal back in April, covering the roughly 5,000 state-chartered banks it supervises. Its rule sets tailored capital and risk-management standards for FDIC-supervised issuers, requires stablecoins be redeemable within two business days in the ordinary course, and settles a question that had been genuinely unresolved: deposits held as stablecoin reserves are not insured on a pass-through basis to the stablecoin holder, and deposit insurance coverage does not change based on whether the underlying deposit is recorded on a traditional ledger or a blockchain.

Treasury moved on the same April timeline, with FinCEN and the Office of Foreign Assets Control jointly proposing the anti-money-laundering side of the law: treating permitted payment stablecoin issuers as financial institutions under the Bank Secrecy Act, with the sanctions-compliance and monitoring obligations that classification carries. “This proposal will protect the U.S. financial system from national security threats without hindering American companies’ ability to forge ahead in the payment stablecoin ecosystem,” Treasury Secretary Scott Bessent said when the rule was announced, describing it as purpose-built to avoid unnecessary burden on issuers.

Put the three pieces next to each other and a stablecoin issuer supervised across all three regimes, a state-chartered bank offering a coin through a Board-supervised holding structure, for instance, has known its AML obligations and its deposit-insurance treatment since the spring. It has only known its reserve composition rules, its capital ratios and how to actually apply for approval since this week.

Why the Sequencing Matters

The GENIUS Act passed with the kind of bipartisan margin, 68 to 30 in the Senate, 308 to 122 in the House, that rarely accompanies financial regulation, and was signed into law in July 2025 as the first federal licensing framework for payment stablecoins. It takes effect on the earlier of 18 months after enactment or 120 days after regulators finalize their implementing rules. Run the math from enactment and the outer deadline lands in January 2027. Every agency in this rulemaking is working backward from that date, and the Fed’s late start means its 60-day comment window, plus whatever time it takes to read the comments and finalize a rule, now eats directly into the runway issuers have to actually build to the final standard rather than a moving target.

The crypto industry’s frustration with the pace has been building for months precisely because of that math: a law passed with rare political consensus to give the sector regulatory certainty has instead produced a rollout where the compliance obligations, AML and deposit insurance, arrived seven months before the prudential requirements that determine how much capital an issuer actually needs to hold. Issuers who structured a compliance program around Treasury’s and the FDIC’s spring rules now have to layer the Fed’s reserve and capital framework on top of decisions they have already made, rather than designing to a single, complete standard from day one.

That sequencing problem compounds the one FinTech Edition has covered building all week. UK Finance’s tokenized-deposit pilot went live this week with seven major banks settling transactions on shared rails, and SoFi went live on Mastercard’s stablecoin settlement network on the consumer side. Banks are not waiting for the U.S. rulebook to finish before building the infrastructure; they are building simultaneously, on the assumption that the rules will eventually catch up to what the market has already started doing. FinTech Edition has reported that this pattern, infrastructure first, supervision second, has been the default posture of U.S. banks moving into stablecoin settlement all year. The Fed’s proposal is the first of the three GENIUS Act pieces to actually confront that gap directly, through the capital and reserve standards that determine whether a bank’s stablecoin activity gets treated as a core banking function or a walled-off, separately capitalized business line.

The AML piece Barr flagged is where the disconnect is sharpest. Treasury’s April rule already put sanctions and Bank Secrecy Act obligations on issuers. What the Fed is now negotiating, separately, is how aggressively the Board itself can enforce compliance failures once they occur. This publication has argued that most banks’ existing AML tooling, built for account-based fund flows with clear originators and beneficiaries, was not designed for the pseudonymous, continuously circulating nature of on-chain stablecoin transfers. A “significant or systemic” threshold for enforcement, if it survives into the final rule, would set a materially higher bar than the case-by-case AML supervision banks are used to in every other line of business.

What It Means for the Finance Leader

For a bank or fintech already issuing, or planning to issue, a payment stablecoin, the practical task now is tracking three separate rulemakings on three separate clocks rather than one unified standard. The FDIC and Treasury rules are further along and closer to final; the Fed’s reserve, capital and application requirements are still open for comment and could move meaningfully before finalization, particularly on the interest-rate and foreign-currency risk questions Barr explicitly invited input on. Any compliance buildout modeled on today’s draft risks being rebuilt once the comment period closes.

For issuers weighing which charter or supervisory path to pursue, the application process proposal is worth reading closely before committing capital to a Board-supervised structure: a defined appeals and hearing process is a meaningful improvement over an opaque approval process, but it is also a signal that the Fed expects contested applications, not a rubber stamp. And for compliance teams already live on stablecoin rails, per SoFi and UK Finance’s rollouts this week, the redemption-rights language in the Fed’s proposal deserves particular attention. Barr called for clarity on “universal redemption rights” in the final rule specifically because that is the mechanism that keeps a stablecoin’s peg credible under stress, and it is not yet settled.

The rulebook is filling in. It just is not filling in all at once, and the agencies with the furthest reach into a bank’s balance sheet, the Fed’s capital and reserve requirements chief among them, are the ones still catching up.

Source: Federal Reserve Board