The Federal Reserve on Sept. 24 proposed capital charges and reserve requirements for payment-stablecoin issuers under its supervision, alongside a new approval track for bank subsidiaries seeking to issue tokens.

The framework would translate the GENIUS Act's mandates into specific calculations and procedures, covering approved subsidiaries of insured state-chartered Fed member banks and certain uninsured state-chartered institutions transitioning to Fed oversight.

What would the reserve regime require?

Reserves would have to equal or exceed the face value of outstanding stablecoins at all times and remain segregated from other assets, per the accompanying Board staff memo. Eligible assets include:

• U.S. cash
• Federal Reserve balances
• On-demand deposits at insured institutions
• Treasuries with 93 days or fewer remaining
• Qualifying overnight Treasury repo and reverse-repo transactions
• Funds invested solely in permitted assets; certain tokenized versions would also qualify

Covered issuers would generally have two business days to redeem tokens. The proposal mandates reserve diversification sufficient to backstop full redemption under stress but declines to set fixed daily or weekly asset-maturity floors or a minimum share held in deposits.

How would operational-risk capital be calculated?

The formula combines graduated charges on outstanding tokens with a revenue-linked component and a loss-based adjustment:

• 2% on the first $20 billion
• 1.5% on the next $30 billion
• 1% above $50 billion
• A separate charge equal to 25% of the three-year average of annual non-reserve-asset revenue

The adjustment would raise or lower that requirement based on realized operational losses. A parallel 2% capital charge would apply to reserve assets consisting of uninsured deposit claims and undercollateralized reverse repurchase agreements.

The Fed approach diverges from the FDIC's April proposal, which set issuer-specific capital requirements with a $5 million floor during a generally three-year startup period and a separate liquid-asset operational backstop tied to the prior 12 months' total expenses.

What reservations did Barr flag?

Fed Governor Michael Barr supported the proposal but called for public input on whether it adequately addresses interest-rate and foreign-currency risks. He also said the final rule should make universal redemption rights clear.

How would the bank application process work?

An insured state member bank seeking approval for an issuing subsidiary would submit a business plan, financial information and supporting compliance and management materials. The Fed would have 30 days to determine whether the application is substantially complete. The Act's 120-day decision clock starts from that substantially complete submission; no decision within the window would mean approval. The proposal also provides for appeals and hearings after a denial.

How would indirect yield arrangements be policed?

The main rule would presume certain indirect yield structures violate the Act's interest ban: an issuer pays interest or yield to an affiliate or related third party, which then arranges payments to holders solely for holding, using or retaining the stablecoin. Related parties include service providers paying yield on the issuer's behalf and white-label partners; for the latter, the presumption targets holders of branded coins at the partner level. Issuers could rebut the presumption with written evidence. Independent merchant discounts and profit-sharing with non-affiliate white-label partners would not be prohibited as such.

When does GENIUS take effect?

Treasury has separately proposed standards for determining whether state stablecoin regimes are substantially similar to the federal framework, allowing state discretion in areas such as capital while seeking uniformity in reserve and anti-money-laundering requirements.

The GENIUS Act takes effect on the earlier of Jan. 18, 2027, or 120 days after primary federal stablecoin regulators issue any final implementing regulations. The Fed's two proposals are not final rules; comments are due 60 days after publication in the Federal Register, framing the next binding step for U.S. dollar stablecoin oversight.