What to Know
- The U.S. Federal Reserve proposed two rules on Thursday to implement major requirements of the GENIUS Act for stablecoin oversight.
- The proposals are open for 60-day public comment periods before the Fed can revise and finalize them.
- One proposal covers capital and reserve requirements, accepted stablecoin activities at Fed-supervised banks, and the treatment of stablecoin rewards.
- The Fed said certain third-party arrangements would be presumed to be prohibited payments of interest or yield.
- The Fed’s approach on stablecoin rewards is consistent with the Office of the Comptroller of the Currency’s proposal.
- The second proposal sets procedures for regulated banks seeking to issue stablecoins, including business plans, financial information, policies, procedures, and other documents.
- The GENIUS Act required U.S. banking regulators and the Treasury Department to put regulations in place by July of 2026.
- The Treasury Department, the Federal Deposit Insurance Corp., and multiple agencies have also advanced related rulemaking tied to stablecoin regulation.
Federal Reserve Moves Deeper Into Stablecoin Rulemaking
The U.S. Federal Reserve has advanced a major piece of the emerging federal framework for stablecoins, proposing rules designed to implement its responsibilities under the Guiding and Establishing National Innovation for U.S. Stablecoins Act, widely known as the GENIUS Act. The proposals mark an important step in the effort to define how stablecoin issuers will be supervised, how banks under Fed oversight may participate in token issuance, and how consumer-facing rewards programs should be treated under the law.
The Fed’s action places the central bank alongside other federal agencies that are still working through the process of converting the GENIUS Act into enforceable regulation. While stablecoins have become a central part of crypto market infrastructure, U.S. policymakers have sought to bring the sector under clearer standards covering redemption, reserves, issuer conduct, and the relationship between tokens and the regulated banking system.
Stablecoins are digital tokens designed to maintain a fixed value, commonly by being redeemable at par against a reference asset such as the U.S. dollar. In practice, their stability depends on the quality of reserves, the issuer’s liquidity management, the legal claim held by token users, and the strength of operational controls during periods of market pressure. The Fed’s proposals focus heavily on those foundations, reflecting the view that stablecoin regulation must address both day-to-day use and stress conditions.
Two Proposals Address Issuers, Banks, and Reserves
The Federal Reserve proposed two rules on Thursday. Together, they are intended to accomplish the central bank’s portion of the multi-agency implementation process for stablecoin issuer oversight under the GENIUS Act. The proposals are now open for 60-day public comment periods, after which the Fed may revise the language and later publish final rules.
The first proposal covers capital and reserve requirements meant to ensure stablecoins are backed by highly liquid assets and that issuers maintain a strong financial base in times of stress. This proposal also outlines what stablecoin-related activities are acceptable at banks supervised by the Fed. Importantly for crypto platforms and payment firms, it includes the stablecoin rewards component, a subject that has been among the most debated issues in the policy conversation.
The second proposal establishes procedures for a regulated bank to begin issuing stablecoins. The Fed said banks would need to provide materials such as a business plan, financial information, relevant policies, procedures, and other documents. This process would give the central bank a formal pathway to review a bank’s planned stablecoin activity before tokens are issued into the market.
For banks, the proposals would create a more defined route into stablecoin activity. For crypto-native companies, the Fed’s language signals that partnerships, reward structures, and issuer arrangements will be examined against the statute’s restrictions. Market participants are likely to focus closely on how final rules define the line between permitted incentives and prohibited yield-like payments.
Stablecoin Rewards Face a Narrow Regulatory Path
One of the most closely watched sections of the Fed’s proposal addresses stablecoin rewards. The GENIUS Act includes a ban on issuers paying interest or yield for holding stablecoins, and the Fed’s proposal interprets that restriction in a way that appears closely aligned with the Office of the Comptroller of the Currency.
The Fed stated that certain types of arrangements involving third parties would be presumed to be prohibited payments of interest or yield. That framing matters because stablecoin issuers and crypto platforms have often explored ways to offer user incentives, rewards, or other benefits connected to token balances. Under the Fed’s proposed approach, some third-party structures may still be treated as effectively equivalent to issuer-paid yield, depending on their design.
At the same time, the agencies appear to be leaving a narrow lane for stablecoin rewards that resemble credit-card incentive programs rather than interest-bearing accounts. That distinction is likely to become one of the central issues during the comment period. Crypto firms, banks, consumer groups, and payment companies may all push for more clarity on what types of rewards can be offered without violating the GENIUS Act’s limits.
The issue has broader competitive implications. Stablecoins increasingly sit at the intersection of crypto trading, payments, remittances, merchant settlement, and digital banking services. If rewards programs are limited, issuers may compete more heavily on liquidity, distribution, compliance status, integrations, and redemption reliability. If regulators permit a wider range of incentives, stablecoin providers may have more room to attract users, though that could raise concerns about deposit-like products outside traditional banking rules.
Market Clarity Act Failure Leaves GENIUS Act in Focus
The question of how much companies such as Coinbase could reward stablecoin users was a sticking point in the debate over the Digital Asset Market Clarity Act, which recently failed. Because attempts to revise the rewards framework through that legislation did not succeed, the GENIUS Act remains the primary law governing stablecoin rewards.
That makes the Fed’s proposal especially consequential. Rather than waiting for a broader congressional rewrite, regulators are now interpreting and applying the law already in place. For the stablecoin market, this means the practical rules of the road are likely to emerge through agency rulemaking, public comments, and final regulatory text.
Market participants will be watching whether the Fed and other agencies preserve a consistent approach. The Fed said its rewards treatment is consistent with the OCC’s proposal, which may reduce the risk of conflicting standards across federal banking regulators. Consistency is particularly important for firms operating through multiple entities or partnerships, because divergent rules could complicate product design and compliance planning.
Redemption at Par Remains Central to the Framework
Fed Governor Michael Barr emphasized the core regulatory concern: stablecoins must be redeemable at par across a range of conditions. He said stablecoins will only be stable if they can be reliably and promptly redeemed at par during both market stress and strain affecting an individual issuer or its related entities.
That principle sits at the heart of stablecoin regulation. A token that trades near par in normal conditions can still face pressure if users rush to redeem, if reserve assets become harder to liquidate, or if confidence in the issuer deteriorates. The Fed’s focus on capital, reserves, and liquidity reflects lessons from both traditional finance and digital asset markets, where confidence can change quickly when redemption mechanisms are questioned.
Highly liquid reserves are intended to help issuers meet redemption demands without forcing asset sales at unfavorable prices. Capital and risk controls are meant to protect against operational failures, affiliated-entity stress, and unexpected market disruptions. For users, the goal is straightforward: a stablecoin should function as promised, including when broader markets are under pressure.
Other Agencies Continue GENIUS Act Implementation
The Fed’s proposals are part of a broader federal rulemaking process. Last month, the Treasury Department proposed its own rules to implement the GENIUS Act, including federal definitions related to what it means to issue U.S. stablecoins and which entities must follow the statute’s requirements.
The Federal Deposit Insurance Corp. had started its process in December, becoming the first among the federal entities that needed to turn parts of the law into regulation. In June, multiple agencies also proposed requiring stablecoin issuers to approach user identification in the same way as other regulated financial firms.
The result is a layered regulatory buildout touching issuer eligibility, reserve quality, consumer redemption rights, bank participation, anti-financial-crime controls, and rewards structures. Although agencies are past the legal timeline set by the GENIUS Act, recent activity shows that the regulatory framework is moving forward across several parts of the federal government.
What Comes Next for Stablecoin Issuers
The Fed’s proposals must first pass through the public comment process. Proposed rules typically gather input from affected companies, trade groups, consumer advocates, compliance experts, and other stakeholders. After reviewing comments, the Fed can adjust its proposal before issuing a final rule. That process often takes several months and can take longer when issues are complex or controversial.
For stablecoin issuers, the comment period offers an opportunity to shape how the final rules handle reserves, bank issuance, operational controls, and rewards. For banks, the proposals provide a first look at the documentation and supervisory expectations that may apply if they want to issue stablecoins directly. For crypto platforms, the rewards language may be the most commercially significant portion, especially for products designed to encourage users to hold stablecoin balances.
The proposals also highlight the growing convergence between crypto market infrastructure and traditional banking supervision. Stablecoins are no longer being treated merely as crypto trading tools. They are increasingly viewed as payment instruments with potential systemic relevance, especially if adoption expands through banks, fintech platforms, exchanges, and merchant networks.
FXCOINZ will continue tracking how the GENIUS Act rulemaking process affects stablecoin issuers, banking participation, and the broader crypto market. The next phase will depend heavily on public comments and whether regulators adjust their approach to rewards, reserves, and bank issuance before final rules are adopted.
Frequently Asked Questions (FAQs)
What did the Federal Reserve propose?
The Federal Reserve proposed two rules to implement major parts of the GENIUS Act. The proposals address stablecoin issuer oversight, reserve and capital requirements, acceptable activities at Fed-supervised banks, stablecoin rewards, and procedures for banks seeking to issue stablecoins.
What is the GENIUS Act?
The GENIUS Act is the Guiding and Establishing National Innovation for U.S. Stablecoins Act. It establishes a legal framework for U.S. stablecoin regulation and requires federal agencies to create implementing rules for issuers and related activities.
How long is the public comment period?
The Fed’s proposals are open for 60-day public comment periods. After that, the central bank can review feedback, revise the proposals, and later publish final rules.
Why are stablecoin rewards controversial?
Stablecoin rewards are controversial because the GENIUS Act bans issuers from paying interest or yield for holding stablecoins. Regulators are now determining which incentive programs may be allowed and which third-party arrangements should be treated as prohibited yield payments.
Does the Fed proposal ban all rewards?
The proposal does not present the issue as a simple blanket ban on every incentive. It says certain third-party arrangements would be presumed to be prohibited payments of interest or yield, while agencies appear to be leaving a narrow path for reward structures similar to credit-card incentive programs.
What would banks need to issue stablecoins?
Under the Fed’s second proposal, a regulated bank seeking to issue stablecoins would need to provide materials such as a business plan, financial information, relevant policies, procedures, and other documents for supervisory review.
Why are reserves important for stablecoins?
Reserves are crucial because they support redemption at par. The Fed’s proposal focuses on highly liquid assets and strong issuer foundations so stablecoins can be reliably and promptly redeemed in a range of market conditions.
Which other agencies are involved?
The Treasury Department, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and multiple agencies are involved in related parts of the stablecoin rulemaking process under the GENIUS Act.
What happens next?
The Fed will collect public comments, review the feedback, and may revise the proposals before issuing final rules. Market participants will be watching closely for changes to the treatment of rewards, reserves, and bank-issued stablecoins.