Federal Reserve Proposes First Formal Rules for Bank-Issued Stablecoins
Washington, Thursday, 1 October 2026.
The Federal Reserve requested public feedback on proposals integrating payment stablecoins into banking supervision under the GENIUS Act. Notably, the framework mandates full asset backing and completely bans paying interest to stablecoin holders.
Federal Reserve Proposes First Formal Rules for Bank-Issued Stablecoins
The Federal Reserve Board has officially requested public comment on two key regulatory proposals aimed at establishing a comprehensive framework for Board-supervised payment stablecoin issuers [1]. Enacted under the GENIUS Act, these proposals seek to integrate stablecoins into the traditional banking supervision umbrella while establishing clear capital, liquidity, and operational resilience standards [2]. This regulatory push represents a critical milestone for corporate treasurers, fintech leaders, and financial institutions navigating the integration of digital assets into mainstream U.S. commercial channels [1]. The comment period will close 60 days after publication in the Federal Register, marking a decisive window for industry feedback before final rules are implemented [2].
Reserve Requirements and Capital Standards
The first proposal would require that Board-supervised payment stablecoin issuers fully back their stablecoins with certain permissible reserve assets, such as short-term Treasury bills and certain other high-quality, liquid assets [1]. The proposal would also establish standardized capital requirements to address certain credit and operational risks of payment stablecoin activities, as well as risk management standards, in accordance with the law [1]. Separately, the proposal would introduce rules for Board-supervised firms that safekeep the assets backing payment stablecoins [1]. Under the proposed regulatory framework, issuers are prohibited from lending or issuing stablecoins as loan proceeds and are subject to bans on deceptive marketing, asset rehypothecation, and disguised interest or yield payments to holders [2].
Prohibition on Stablecoin Yield
A central component of the GENIUS Act is the mandate that prohibits permitted payment stablecoin issuers from paying interest or yield to holders, a rule scheduled to take effect on January 18, 2027 [3]. This prohibition aims to prevent payment stablecoins from functioning as unregulated, deposit-taking accounts, mirroring similar restrictions in the European Union’s MiCA regulation [3]. Unlike MiCA, this U.S. prohibition applies only to issuers, not to exchanges, affiliates, or third-party distributors, though regulators are increasingly prioritizing economic substance over terminology [3]. The Federal Reserve released its stablecoin regulatory proposal on September 24, 2026, aligning with the OCC’s presumption against third-party yield, effectively restricting rewards to transaction-based perks rather than interest on idle balances [4].
State Certification and Treasury Oversight
On September 30, 2026, the Department of the Treasury released an interim final rule regarding procedural regulations and forms for the Stablecoin Certification Review Committee to implement section 4(c) of the GENIUS Act [5]. The regulation establishes the framework for the Committee to approve or deny certifications submitted by State payment stablecoin regulators, as mandated by section 4(c)(4) of the GENIUS Act [5]. The rule became effective on September 30, 2026, though certifications are currently not accepted pending Paperwork Reduction Act approval of the information collection [5]. State payment stablecoin regulators are required to submit certification by the deadline of January 18, 2028, to satisfy 12 U.S.C. 5903(c)(4)(A) [5].
Legislative Context and Economic Impact
The Digital Asset Market Clarity Act failed a procedural Senate vote on September 15, 2026, with a vote count of 49–50, preventing advancement of stablecoin reward compromises initially proposed by Senators Thom Tillis and Angela Alsobrooks in May 2026 [4]. In mid-September 2026, eight U.S. banking groups formally urged the Senate to tighten restrictions on stablecoin rewards, highlighting the tension between traditional banking and digital asset innovation [4]. The Treasury Borrowing Advisory Committee’s April 2025 analysis identified approximately $6.6 trillion in U.S. transactional deposits as the balances most exposed to substitution risk from stablecoins [3]. Final rules for the GENIUS Act are mandated to be completed by January 2027, with the law taking effect on January 18, 2027, regardless of regulatory progress [4].
Sources
- www.federalreserve.gov
- www.troutmanfinancialservices.com
- www.mondaq.com
- www.faacapital.lt
- www.govinfo.gov