Fed Proposes 2-Day Stablecoin Redemptions and Capital Rules

Fed Sets Stablecoin Redemption Exceptions

Under the implementation proposal, a Board-supervised issuer’s disclosed redemption policy would generally promise payment no later than two business days after a request. That is an outer limit, and an issuer could offer faster processing.

The deadline would have exceptions. The Board could extend it for safety and soundness, financial stability or public-interest reasons. Proposed safe harbors would also cover necessary customer checks under financial-crime laws and delays outside an issuer’s control, if the issuer demonstrates the circumstances to the Board’s satisfaction.

A token’s ability to move between wallets around the clock therefore would not establish an unconditional right to receive bank dollars immediately. Moving a token and redeeming it with its issuer are different transactions, with different operational requirements.

The package would also require full backing with permissible reserves, including short-term Treasury bills and other qualifying liquid assets. It proposes safeguards for Board-supervised firms holding those reserves in custody, alongside clarification of the stablecoin activities banks may conduct.

This advances a different part of implementation from the June stablecoin customer-identification proposal. That earlier action addressed identifying direct customers. The September package adds a proposed prudential framework and an application route, rather than merely repeating the customer-check requirements.

Stablecoin Capital Charges Reach 2%

The Fed’s implementation staff memo describes operational-risk capital charges of 2% on the first $20 billion of outstanding stablecoins, 1.5% on the next $30 billion and 1% above $50 billion. These are graduated bands, rather than one percentage applied to an issuer’s entire supply.

A separate component would equal 25% of three-year average annual revenue from non-reserve assets. Realized operational losses would adjust the operational requirement through a loss-based scaling mechanism. The proposal also includes a 2% capital charge for uninsured deposit claims and undercollateralized reverse-repurchase exposures.

Reserve backing and capital serve different purposes. Reserves support the issuer’s obligation to repay token holders, while capital provides a cushion against specified losses. An issuer meeting its reserve obligation would still have to satisfy the separate capital framework.

The proposal’s scope also needs care. Board-supervised issuers include approved subsidiaries of insured state member banks and certain state-qualified issuers that transition to the Fed’s framework. The prudential requirements are not a blanket announcement that every existing stablecoin company now answers to the Federal Reserve.

Barr said public feedback should test whether the proposed protections adequately address interest-rate and foreign-currency risks. He also called for clear universal redemption rights and questioned how a separate supervisory standard for significant or systemic anti-money-laundering deficiencies could affect enforcement.

Those concerns leave substantive issues for the final rule. A stablecoin can be backed by liquid assets and still encounter redemption pressure if users lose confidence in the issuer or its access to those assets.

Banks Face a 120-Day Application Clock

The separate application proposal addresses insured state member banks seeking approval for a subsidiary to issue payment stablecoins. The bank would apply, and the Board would evaluate management, compliance capacity, and safety and soundness.

The proposed process requires a decision within 120 days of receiving a substantially complete application. An application meeting that threshold would be deemed approved if the Board failed to decide within the statutory period. Missing information needed to assess the required factors could prevent an application from qualifying as substantially complete.

That distinction prevents the clock from being read as a guaranteed four-month path from an initial expression of interest to launch. The application first has to provide enough information for the regulator to evaluate it.

The application notice also says these procedures would not apply to uninsured state member banks. An insured state member bank is a state-chartered bank that belongs to the Federal Reserve System, a specific category rather than a description of every U.S. bank. Institutions considering entry would need to establish which regulator and approval route govern their proposed subsidiary before relying on this timetable.

According to the application staff memo, the submission would include a business plan, financial information, capital-structure documentation, relevant policies, biographical reports and certifications. The proposal also provides procedures for appeals, hearings and final determinations.

Staff said the process would use information the Fed already holds where possible, reducing duplicative submissions while preserving its safety review. That could simplify the paperwork for an existing supervised bank, although the proposal does not name applicants or predict how many institutions will seek approval.

The distinction between a banking permission and an operating stablecoin business is already visible in OpenReserve’s conditional OCC charter, where planned stablecoin services required additional steps. The Fed package concerns a different regulator and application process, but similarly makes approvals and operating requirements central to market entry.

It also runs alongside the CFTC’s recent tokenized customer-fund guidance. That guidance addresses derivatives firms’ investments and records; it does not grant permission to issue stablecoins under the Fed’s proposed framework.

Alternative.me’s Crypto Fear and Greed Index read 74, or Greed, on September 26, up from 71 the previous day. It measures broad market sentiment rather than support for the proposed rules.

The Fed says comments close 60 days after publication in the Federal Register. Its announcement gives no fixed calendar deadline or final-rule date. The next steps are publication, public submissions and the Board’s decisions on redemption exceptions, capital calibration and bank application procedures.