The Federal Reserve has opened the next chapter of GENIUS Act implementation, releasing two proposed rules on Sep. 24 that would govern the reserves behind payment stablecoins and set out how insured state member banks can apply to issue tokens through subsidiaries.
The proposals, announced in a Board release, arrive roughly two months after federal regulators missed the statute’s Jul. 18, 2026 deadline for finishing implementing rules, and they give the industry its clearest picture yet of how the central bank intends to police dollar-pegged tokens issued by firms under its supervision.
What the reserve proposal would require
Under the first draft, a Fed-supervised issuer would be required to hold permissible assets that fully back its outstanding payment stablecoins. The Fed identified short-term U.S. Treasury bills and certain other high-quality liquid assets as examples of eligible reserves. Full backing means the issuer must hold assets against every token it has issued, rather than relying on a smaller reserve pool.
The same proposal would introduce standardized capital requirements addressing credit and operational risks tied to payment stablecoins, alongside separate risk-management standards governing how issuers run the activity. Firms supervised by the Fed that safeguard the assets backing stablecoins would also fall under new rules — a provision that effectively extends the framework to custodians and reserve holders, not just issuers themselves.
Importantly for U.S. token holders, the proposal does not convert a payment stablecoin into an insured bank deposit. Its requirements apply to the covered issuer and its reserve arrangements, while the companion proposal addresses how a bank asks permission to enter the business in the first place.
The first draft would additionally clarify which stablecoin and related activities Fed-supervised banks may undertake, giving banks a proposed regulatory basis for activities beyond simply filing an application to create a stablecoin-issuing subsidiary.
The bank application route
The second proposal targets insured state member banks seeking Fed approval for a subsidiary to issue payment stablecoins. Under the application draft, the bank — not the proposed subsidiary — would be the applicant, filing with its appropriate Federal Reserve Bank.
Applicants would submit a business plan, financial information and other material the Fed needs to assess the operation. The filing would have to describe the plan, state what approval the bank is seeking and explain why it should be granted under the factors written into the GENIUS Act. The draft also sets procedures for hearings, appeals and final decisions.
Timing is a material part of the design. The Fed would notify an applicant within 30 days whether its filing is substantially complete. Once it is, the GENIUS Act gives the Fed 120 days to decide — and under the law, a complete application is deemed approved if the central bank does not act within that window. A substantial change to a proposed issuer’s business plan, ownership or financial condition could reset that clock by requiring more information and a new submission date.
The Fed is also asking for comment on applications involving multiple banks in a stablecoin consortium, including whether a single filing could cover participating insured state member banks in some circumstances. The question has immediate relevance: on Sep. 1, Bank of America, Citi, Goldman Sachs and 18 other financial institutions committed to establish a joint stablecoin company targeting a U.S. dollar token in the first half of 2027. That group said it intends to meet applicable GENIUS Act requirements, though its announced plan does not establish that the venture would use the Fed application route described in the proposal.
Where this fits in the broader rulemaking
The Fed’s drafts join rulemaking already underway across Washington. In August, Treasury sought feedback on proposed definitions for when payment stablecoins are issued, offered or sold in the United States — questions that determine which activity falls under U.S. licensing and distribution restrictions.
The Office of the Comptroller of the Currency is further along. Comptroller Jonathan Gould set a November target for final OCC rules after industry feedback, with a proposal covering reserves, redemptions, custody, supervision and issuer applications.
Treasury has identified Jan. 18, 2027, as the expected effective date for the GENIUS Act’s main issuer restrictions, though the statute also allows an earlier start 120 days after responsible federal regulators issue their final implementing rules — a provision that gives agencies an incentive to finish, and the industry a reason to watch the calendar closely.
For now, the two Fed notices are proposals, open to revision. Interested banks, issuers and members of the public can submit comments during a 60-day period that begins when the notices appear in the Federal Register, via the Fed’s online proposal system, mail or email, with submissions identified by docket number.
Market context at publication: Bitcoin traded near 84,286 USD, Ethereum near 2,685 USD and Solana near 117 USD, little changed on the day, per a 21:00 UTC on Sep. 24 CoinGecko snapshot.
Disclaimer: This article is for informational purposes only and does not constitute financial advice.
T-bill reserves pay the issuer maybe 4% while capital requirements sit on top. spreads on bank stablecoins get razor thin, the capital part is where the lobbying war happens
roughly 4% on T-bill reserves minus capital buffers plus dual supervision overhead. the bank stablecoin margin math looks grim, that capital layer is where the lobbying war goes
your 4% math assumes the spread stays with the issuer. once capital buffers stack on top of custodian rules too that 4% turns into 1% real quick
1% on tens of billions is still a real business, card networks print on thinner. the lobbying war is about who keeps that sliver
that 4% barely survives dual supervision overhead on top of capital buffers. issuers park this in subsidiaries and the lawyers eat whatever margin is left
Four percent on T-bills minus subsidiary overhead and two sets of examiners. That spread only works at gift card scale volumes, which is exactly the point.
capital buffers on top of custody costs, agreed. but bank issuance is deposit defense, not spread chasing. plenty will run these at breakeven just to keep the float on their own ledger
Two months past the Jul. 18 deadline and we finally get drafts. Full reserve backing was expected, but the 120-day approval clock for bank subsidiaries is the detail issuers will actually read twice.
120 days sounds tight until you remember how long Fed charter applications normally drag. At least now there is a clock the applicant banks can actually point to.
missed the July 18 deadline by two months and we are supposed to celebrate a draft. cool cool cool
two months late and these are still proposals, comment window runs before anything is final. no bank files a 120 day application on a draft
true, but the comment window lets banks prep applications in parallel. nobody sits on their hands waiting for final text on something this telegraphed anymore
the comment window will be 90 percent issuer lawyers fighting the capital add on. full reserve backing was never the controversial part
fair, two months late stings, but a late draft with a hard 120 day approval clock still beats guidance that never arrives. banks can at least plan against a deadline now
drafts are how the Fed pressure tests pushback before final text. a late proposal banks can comment on still beats an interim rule nobody got to fight
two months late and still drafts, sure. but late drafts with a comment window beat the interim rule the fed could have dropped with zero warning
fair, but a comment window plus a real 120 day clock beats two more months of silence. banks can at least staff up against a draft
two months late sure, but the 120 day clock plus subsidiary structures means actual applications by mid 2027. the alternative was another year of guidance limbo
mid 2027 assumes banks file the moment the clock starts. add the comment period on top of the 120 days and you are looking at late 2027 before a single subsidiary is live
Full reserve backing with T-bills only was the obvious endgame. The interesting bit is capital requirements on top, that is where costs will bite issuers.
Insured state member banks issuing through subsidiaries. The law firms drafting those structures are about to have a very good quarter.
subsidiary structures mean dual supervision, the fed on top of whatever state charter applies. the law firms get paid twice to explain that to boards
the custodian provision is the sleeper here. every state trust company holding reserve assets just inherited a compliance department
state trust companies inheriting compliance departments is the sleeper clause. south dakota charters just got a lot more expensive to run
custodians getting folded into the framework is the clause everyone missed. every reserve holder just became a fed supervised entity overnight
the 120 day approval clock is the whole ballgame. banks can finally point at an actual deadline instead of begging the fed for status updates
state trust charters inheriting fed compliance overnight. south dakota just became the busiest regulator in stablecoins