A stablecoin is only as sound as what stands behind it. The Federal Reserve has now put a number on that for stablecoins issued through banks it supervises: every one would have to be fully backed by permitted reserve assets, such as short-term U.S. Treasury bills. The rule is a proposal and is not in effect.
The Fed Board announced two proposals on September 24 to carry out the GENIUS Act, the 2025 federal law that created a framework for payment stablecoins, which are digital tokens meant to hold a steady value of one dollar. The public has until November 30 to comment.
What the reserve proposal requires
The first proposal covers Board-supervised payment stablecoin issuers, according to the Fed’s announcement. It would require them to fully back their stablecoins with permissible reserve assets, such as short-term Treasury bills and certain other high-quality, liquid assets. For every token in circulation, the issuer would have to hold qualifying assets behind it.
The same proposal sets standardized capital requirements for certain credit and operational risks of stablecoin activities, along with risk management standards required by the law. It adds rules for Board-supervised firms that hold the reserve assets in safekeeping, and it clarifies which stablecoin activities banks under the Board’s supervision may carry out.
The second proposal covers how a bank gets in the door. It creates a tailored application process for Board-supervised banks that want to issue payment stablecoins. Applicants must send a business plan and financial information, among other documents, and the proposal sets out a process for appeals, hearings and final decisions on applications.
Anyone who holds stablecoins, or is thinking about it, will want to know what this changes today. Nothing yet. The reserve rule is a proposal, the Fed’s announcement does not give an effective date for it, and the release does not address deposit insurance for stablecoin holders. Stablecoins issued through banks under the proposal would be backed by reserves, which is a different protection from insurance on a bank deposit.
The proposal’s reserve rules can still change before they are final, and the comment period that closes on November 30 is the last scheduled chance for the public to weigh in.
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November 30 and the Federal Register
The comment period runs 60 days from publication in the Federal Register. The notice was published on September 29 under Docket No. R-1899, and it says comments must be received by November 30, 2026. Comments can be filed on the Board’s proposals website, by mail to the Board’s secretary, Benjamin W. McDonough, or by email to publiccomments@frb.gov with the docket number in the subject line. The Board generally posts comments publicly, personal information included.
The notice says the GENIUS Act takes effect on the earlier of 18 months after it became law on July 18, 2025, which is January 18, 2027, or 120 days after the primary federal regulators issue final regulations. The notice also states that nothing in the act overrides state consumer protection laws, including for stablecoin issuers supervised by the Board.
What Governor Barr wants tightened
Fed Governor Michael Barr issued a statement supporting the proposed rulemaking. He also said where he wants it improved. “Stablecoins will only be stable if they can be reliably and promptly redeemed at par in a range of conditions,” Barr said, and he called for universal redemption rights to be clear in the final rule. Redeeming at par means swapping a token for one dollar.
Barr welcomed the proposal’s limits on reserve assets and backed transparent, standardized capital requirements. He warned that even highly liquid government debt can come under pressure in times of stress, which could affect whether reserves hold their value. He asked for public input on whether the rule adequately covers interest rate and foreign currency risks.
He also objected to the idea of limiting supervisory or enforcement action to “significant or systemic” deficiencies in anti-money-laundering programs. Barr said the effect of that standard on the Board’s ability to verify that programs are compliant is unknown, and that the same concern applies to the Board’s anti-money-laundering proposal from July.
Reading the proposal before the deadline
The Fed has posted the full text of both proposals as board memos linked from its announcement, and the Federal Register notice carries the proposed rule. Both are free to read at federalreserve.gov and federalregister.gov. The announcement’s own wording on reserves is the plainest summary of what the proposal says.
Anyone comparing stablecoins will want to look for three things in a final rule: which assets can sit in the reserve, what rights holders have to redeem and on what terms, and how much capital an issuer has to keep. Those are the pieces Barr addressed, and they are the pieces the November 30 comments can change.
The Fed has not said when it plans to issue a final rule. Until it does, the proposed reserve requirement describes what the Board wants and not what any issuer is bound to do.
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This article was produced with AI assistance and reviewed by The Financial Wire’s editorial team.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
