The Fed Put a Price on Every Stablecoin in Circulation

The Federal Reserve was the last big federal regulator to show its hand on stablecoins, and it arrived with a number. On September 24, the Fed's seven-member board voted unanimously, per American Banker, to propose two rules implementing its share of the GENIUS Act. The headline is not full reserve backing, which the law already requires. It is that the Fed wants issuers under its supervision to hold capital against every dollar of stablecoins they have in circulation.

That makes the Fed's version the most prescriptive federal stablecoin rulebook yet, and it lands two months after every agency blew the statute's July 18 deadline for implementing rules, according to American Banker. The public gets 60 days to comment once the proposals appear in the Federal Register.

Who the Fed actually supervises

The scope is narrower than the headlines suggest. The Fed's staff memo defines "Board-supervised" issuers as two groups: subsidiaries of insured state member banks that the Fed approves to issue payment stablecoins, and uninsured state-chartered depository institutions that cross $10 billion in outstanding stablecoins and are pushed from state oversight into the Fed's framework. Issuers chartered through the OCC, FDIC or NCUA follow those agencies' rules.

The second proposal is the on-ramp for the first group. It lays out how a state member bank asks the Fed for permission to issue through a subsidiary: an application by letter containing a business plan, financial information, policies and procedures, capital structure documentation, biographical reports and required certifications. Staff wrote that the Board would lean on information it already holds as the bank's primary regulator. Denials can be appealed through a hearing.

The capital charge is the story

Reserves come first. Issuers would have to hold assets with a fair value at or above the par value of every coin outstanding, segregated and limited to U.S. dollar cash, Fed balances, demand deposits at insured banks, Treasuries maturing in 93 days or less, Treasury-backed overnight repo and reverse repo, shares of eligible investment funds holding only those assets, and tokenized versions of some of them. Redemptions must be honored within two business days. An issuer that falls below one-to-one must notify the Fed and liquidate and redeem, unless the Board lets it follow a plan to get back to full backing.

Then comes capital, on top of reserves. According to the staff memo, the Fed would impose a 2% capital requirement on reserve assets held as uninsured deposit claims or undercollateralized reverse repos, with a look-through for the same exposures inside eligible funds. Operational risk carries a separate, standardized charge: 2% of the first $20 billion in stablecoins outstanding, 1.5% on the next $30 billion and 1% above $50 billion, plus 25% of the issuer's three-year average revenue from non-reserve activities such as custody. A "loss scalar" moves that charge up or down depending on realized operational losses.

The arithmetic is not trivial. CryptoSlate worked through a $10 billion issuer and landed at $200 million in baseline operational capital. By Flux's own math on the same schedule, a $50 billion issuer would need $850 million before any revenue or credit components. In a business that earns the spread between Treasury yields and zero-interest tokens, that capital comes out of return on equity.

The penalty for missing is automatic. Fall short at a quarter-end and the issuer must file a plan to fix it. Still short at the next quarter-end and the proposal requires it to liquidate reserves and redeem all outstanding coins.

A different philosophy from the OCC

The contrast with the OCC is sharp. The OCC's proposal, published March 2, set initial capital by business plan and risk profile with a $5 million floor during the de novo period, and required liquid assets equal to 12 months of total expenses as an operational backstop, per CryptoSlate. The OCC considered a charge tied to coins outstanding and left it out. The Fed put it in.

The Fed also wrote rules for the parent banks. Under the GENIUS Act, a parent cannot be forced to hold more capital for its issuer subsidiary than the issuer's own requirement. The Fed's answer is to have a state member bank or holding company deconsolidate the issuer and deduct the issuer's minimum capital from its own common equity tier 1. Clarity, with a direct hit to the parent's capital ratio.

A few other pieces matter for the wider market. The proposal carries the law's ban on paying interest or yield "solely in connection with the holding, use, or retention" of a stablecoin, and presumes some third-party arrangements count as prohibited yield, consistent with the OCC's approach. The Fed also used its exclusive authority to write anti-tying rules for every permitted issuer, not just its own, barring issuers from conditioning service on buying another product or avoiding a competitor.

Barr's dissent-in-spirit

Governor Michael Barr voted yes and still wrote a statement that reads like a list of objections. "Stablecoins will only be stable if they can be reliably and promptly redeemed at par in a range of conditions," he wrote, calling for input on whether the rule handles interest rate and foreign currency risks and for "universal redemption rights" to be clear in the final rule.

His sharpest point was on money laundering. The proposal would let the Fed take supervisory or enforcement action over a Bank Secrecy Act deficiency only if it is "significant or systemic," matching a standard the Fed recently proposed for banks. "I am concerned that the 'significant or systemic' standard may have unknown effects on the Board's ability to effectively substantiate that an institution establishes and maintains compliant programs," Barr wrote, per The Block. His bottom line: "further work will undoubtedly be required if stablecoins are to be reliable payment instruments."

Why it matters

The clock is real. The staff memo notes the GENIUS Act takes effect on the earlier of January 18, 2027, or 120 days after the primary regulators issue final rules. None has finalized yet, Banking Dive reports. With the Fed's proposal out, all four federal banking regulators now have drafts on the table, and they do not agree on the most expensive question: how much capital an issuer should carry.

For banks weighing a stablecoin subsidiary, the Fed route now has a visible price tag and a defined application path. For issuers comparing charters, the OCC's business-plan approach looks cheaper at scale, and that gap is exactly what comment letters over the next 60 days will try to close. The first federal stablecoin rulebook is not one rulebook. It is four, and the Fed just wrote the strictest chapter.