Fed Proposes New Capital and Redemption Rules for Stablecoin Issuers

TechFlow reported on September 25, citing Cointelegraph, that the Federal Reserve has formally proposed new capital and redemption regulatory requirements for stablecoin issuers to advance the GENIUS Act. The new rules establish a tiered capital charge mechanism: issuers must pay a 2% operational risk capital charge on the first $20 billion in outstanding issuance, a 1.5% rate applies to the next $30 billion, and any amount above that is charged at 1%, alongside additional credit risk requirements.

Regarding redemptions and transparency, the regulations mandate that issuers process redemption requests within two business days. If reserves fall below the 1:1 backing ratio, institutions must immediately notify the Federal Reserve and submit a remediation plan or liquidate to settle redemptions. Furthermore, issuers must publish monthly reserve details, which must be audited by an accounting firm and certified by senior executives.

Federal Reserve Governor Michael Barr supports the foundational framework of this proposal but emphasizes that stablecoins must remain capable of being redeemed quickly at par value during market stress. He calls on the public to evaluate the framework's adequacy in addressing interest rate and foreign exchange risks, noting that a clear statutory definition of universal redemption rights will be required in the future.