US Fed Proposes New Rules for Payment Stablecoin Issuers

The US Federal Reserve has proposed a regulatory framework for payment stablecoin issuers and related banking activities supervised by the central bank, opening the proposals to public comment.

The proposals are intended to implement provisions of the GENIUS Act, which establishes a federal framework for payment stablecoins.

Under the first proposal, Federal Reserve-supervised stablecoin issuers would be required to fully back their tokens with permitted reserve assets, including short-term US Treasury bills and other high-quality liquid assets.

The proposal would also introduce standardised capital requirements for stablecoin activities to address credit and operational risks, alongside risk-management requirements mandated by the law.

Separate provisions would establish requirements for Federal Reserve-supervised firms that safeguard the assets backing payment stablecoins. The proposal would also clarify which stablecoin-related activities are permissible for banks supervised by the Federal Reserve.

The second proposal would create a dedicated application process for Federal Reserve-supervised banks seeking approval to issue payment stablecoins.

Banks applying under the proposed framework would need to provide a business plan, financial information and other required documentation. The framework would also establish procedures for appeals and hearings, as well as the process for reaching final decisions on applications.

The Federal Reserve is seeking public feedback on both proposals as it develops the regulatory framework for payment stablecoins and the institutions involved in issuing, safeguarding and supporting them.

Source: FSX Business News