The Federal Reserve Board is seeking public comment on two proposals related to establishing a regulatory framework for payment stablecoin issuers under the GENIUS Act.
The first proposal would require payment stablecoin issuers to fully back their stablecoins with certain permissible reserve assets, like short-term Treasury bills. It would also establish standardized capital requirements to address certain credit and operational risks of payment stablecoin activities, as well as risk management standards.
Further, the proposal would introduce rules for firms that protect the assets backing payment stablecoins. And, it would also clarify the permissibility of stablecoin and related activities for banks.
The second proposal would establish a tailored application process for banks applying to issue payment stablecoins. These applicants would be required to submit a business plan and financial information, among other documents. In addition, the proposal would create a process governing appeals, hearings, and final determinations for applications.
“Stablecoins will only be stable if they can be reliably and promptly redeemed at par in a range of conditions. This 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. I support the proposed rulemaking as a step in that direction within the framework provided by the GENIUS Act, particularly as the rulemaking identifies key questions on which public feedback will be important,” Fed Governor Michael Barr said.
Barr added that while the proposal is an important step in implementing the GENIUS Act, more work will be required if stablecoins are to be reliable payment instruments.
The comment period will close 60 days after publication in the Federal Register.