The Federal Reserve has proposed a rulebook that would require U.S. payment stablecoin issuers to value reserves every day, maintain assets equal to all tokens outstanding, and complete valid customer redemptions within two business days. Released on Sept. 24, the proposals would bring issuers operating under the Federal Reserve’s supervision closer to bank-style standards for liquidity, capital, custody, reporting, and operational resilience.
The measures remain proposals and will enter a 60-day public-comment period once published in the Federal Register. Their eventual form will shape which institutions can issue dollar-pegged tokens under the new federal framework, particularly where an issuer relies on short-term securities, money-market funds, outside custodians, or third-party blockchain infrastructure.
One proposal establishes operating standards for stablecoin issuers. The second creates an application process for banks supervised by the Federal Reserve that want to create a stablecoin-issuing subsidiary. Together, they place daily reserve management and redemption capacity at the center of federal oversight.
Daily valuation and narrow reserve rules
Under proposed 12 CFR §247.11, an issuer would need to record the fair value of its reserves at least once every day, measured at 5 p.m. in the time zone of the supervising Federal Reserve Bank. The value of those reserves could not fall below the total redemption amount owed to stablecoin holders.
The proposed list of eligible reserve assets is deliberately narrow. It includes cash, balances held at a Federal Reserve Bank, qualifying bank deposits, U.S. Treasury securities maturing within 93 days, qualifying overnight repurchase and reverse-repurchase agreements, and certain money market funds.
That approach would limit an issuer’s ability to count longer-dated bonds, less liquid corporate instruments, or riskier digital assets as stablecoin backing. Short maturities and overnight transactions reduce exposure to sharp interest-rate moves, which can erode the market value of fixed-income securities before they mature.
The Federal Reserve’s draft also goes beyond broad asset categories. Issuers using repo transactions or money market funds would need to meet specific requirements involving counterparties, collateral, and portfolio exposures. A stablecoin company could therefore need visibility into the assets held inside a money market fund before treating its shares as eligible reserves.
Issuers would not have unrestricted access to surplus reserves. The proposal would permit withdrawals of excess reserves only after month-end reporting has been reviewed and certified through a specified monthly process. That provision is designed to prevent reserve assets from being transferred out before supervisors have confirmed the issuer’s financial position.
Redemption deadline places pressure on liquidity planning
Proposed §247.12 would require issuers to publish a redemption policy and honor a valid request no later than two business days after receiving it. The policy would have to explain how a redemption can be submitted, which conditions apply, and how the issuer processes the request. It would also need to remain publicly available through channels including a website.
The two-business-day requirement would force issuers to match reserve assets with real-world payout operations. Holding short-dated Treasury bills may satisfy an asset-quality test, but an issuer would also need systems, banking relationships, staffing, and liquidity arrangements capable of turning those assets into payments during periods of unusually heavy demand.
The draft allows regulators to impose limits on redemptions in specified circumstances. It does not establish a broad option for issuers to halt payouts at their own discretion. Michael S. Barr, a member of the Federal Reserve Board of Governors, said in a same-day statement that final rules should set out redemption rights clearly.
The consultation materials also identify stress-scenario redemption capacity, interest-rate risk, and foreign-exchange risk as areas likely to receive detailed feedback. Dollar-pegged tokens can circulate globally, meaning an issuer may face redemption demands across time zones and payment systems even when its core reserves and banking operations are based in the United States.
Capital rules address technology and processing failures
The Fed’s proposed capital standard, in §247.15, separates credit-risk capital from operational-risk capital. Credit-risk capital would be calculated daily, while operational-risk capital would be calculated quarterly.
Operational risk covers losses arising from events that do not necessarily involve a reserve asset declining in value. The proposal specifically points to outages, cyberattacks, key-management failures, processing errors, third-party disruptions, and other breakdowns that could prevent an issuer from maintaining the token or meeting redemptions.
New issuers would face a minimum capital requirement of $5 million, indexed to U.S. nominal GDP. Supervisors could require more capital based on an issuer’s size and risk profile. The threshold creates a financial entry requirement, while the wider operational rules add compliance burdens that will likely favor firms with established treasury, legal, cybersecurity, and payments capabilities.
The proposal would also prohibit stablecoin names or marketing that suggest U.S. government backing, federal deposit insurance, or another public guarantee. Issuers could not pay compensation solely for holding, using, or retaining a stablecoin, a restriction aimed at preventing payment tokens from being promoted as yield-bearing products through issuer-funded rewards.
Custody and reporting rules extend beyond the reserve portfolio
The custody provisions would require records that distinguish stablecoin reserves from a custodian’s proprietary assets and identify an issuer’s legal entitlement to the assets. Omnibus custody accounts would remain permissible, but internal records would have to continuously identify each client’s share and allow the assets to be released promptly for redemptions.
Those standards place particular weight on recordkeeping during a custodian failure or a dispute over ownership. An issuer may hold reserves through several banks, brokers, trustees, or fund providers, making accurate ownership records essential when assets need to be mobilized quickly.
Proposed §247.14 would require confidential weekly operational reports and quarterly reports covering financial condition and income. Chief financial officers and directors would need to certify the quarterly filings. Issuers would also submit annual certifications on anti-money-laundering and sanctions compliance.
Barr separately pointed to a proposed threshold under which some supervisory or enforcement action connected to anti-money-laundering deficiencies would be triggered only where weaknesses are “material or systemic.” That language could become a contested feature of the consultation, alongside rules governing reserves, capital, and redemption capacity.
Banks would receive a defined subsidiary application process
The second proposal sets a review process for Federal Reserve-supervised banks seeking permission to establish a stablecoin-issuing subsidiary. Applicants would need to submit a business plan, financial information, governance and risk-management arrangements, and frameworks for reserves and redemptions.
The Federal Reserve would have 30 days to decide whether an application is substantially complete. Once that determination is made, the agency would have 120 days to reach a decision. The proposal includes a deemed-approval mechanism if the Federal Reserve does not act by the deadline.
Because the formal review clock begins only after an application is considered complete, banks would need extensive preparation before filing. Required materials would cover expected issuance volumes, intended customers, the blockchains used, smart-contract controls, custody arrangements, redemption channels, and plans to wind down the operation.
Banks relying on external technology providers would also need to address subcontracting, data access, recovery plans, and the controls retained by the bank. The requirement reflects the operational reality that a regulated issuer may depend on outside firms for wallet infrastructure, blockchain monitoring, smart-contract development, or transaction screening.
If adopted substantially as drafted, the framework would give stablecoin issuance a clearer federal operating path while demanding proof that issuers can preserve par-value backing and continue paying holders through technical and market stress. The public-comment process will determine how much flexibility issuers receive in meeting those standards and how quickly banks can bring federally supervised stablecoin subsidiaries to market.
For deeper context on regulation and payments, explore how 2026 could redefine the role of global stablecoins.
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