Fed Proposes Stablecoin Rules: Full Reserve Backing and Capital Requirements

The US Federal Reserve has taken a major step towards setting the rules for stablecoins. On September 24, 2026, the Fed's Board of Governors released two draft rules for payment-stablecoin issuers it supervises, and asked the public to weigh in before anything is finalised.

The proposals are the Fed's part of putting the GENIUS Act into practice. That law, the Guiding and Establishing National Innovation for US Stablecoins Act, became law in July 2025 and created the first federal framework for dollar-pegged digital tokens. It's worth stressing what these new rules are: a proposal, not final regulation.

What stablecoins are, and why the rules matter

Stablecoins are crypto tokens designed to hold a steady value, usually one US dollar. They've become the backbone of crypto trading and are increasingly used for payments and sending money across borders. The promise is simple: one token, always worth one dollar, redeemable on demand.

That promise only holds if the issuer really has the money to back every token, and can pay it out quickly, even when lots of people want their dollars back at once. The Fed's proposals are about making sure that's true.

How we got here

For years, stablecoins operated in a grey zone in the US, with no single federal rulebook. Issuers published their own reserve reports, and investors largely had to take them at their word. The collapse of the algorithmic TerraUSD stablecoin in 2022 showed how quickly a token that promised to stay at one dollar could fall apart, and it pushed lawmakers to act.

The GENIUS Act set the broad principles, including that payment stablecoins must be backed one-for-one by safe, liquid assets. But the law left the detailed rulebook to the banking regulators, including the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. Each covers a different set of issuers. This week's drafts are the Fed's share of that work.

Proposal one: full backing and capital requirements

The first proposal would require stablecoin issuers supervised by the Fed to fully back their tokens with permitted reserve assets. Those reserves would be limited to highly liquid, high-quality assets, such as short-dated US Treasury bills, that regulators consider able to support a reliable peg.

It would also set standardised capital requirements and risk-management standards. Among the key numbers reported:

• A proposed $5 million initial capital floor for a newly approved issuer during its first three years.
• A proposed 2% capital charge on uninsured reserve deposits, reflecting the extra risk of keeping reserves in bank deposits that exceed insurance limits.

Capital acts as a cushion. Reserves back the tokens; capital is there to absorb losses if something goes wrong, so a small problem doesn't turn into a run.

Proposal two: how banks get approval

The second proposal sets out a tailored application process for Fed-supervised banks that want to issue payment stablecoins, generally through subsidiaries. Applicants would need to submit business plans, financial information and other documentation, and the proposal includes procedures for appeals and hearings.

This is important for traditional finance. It gives banks a clearer route into issuing their own dollar tokens, a space that has so far been dominated by crypto-native companies.

The rules would cover issuers under the Fed's supervision, including state member banks of the Federal Reserve System and certain other state-chartered issuers. The Fed's seven-member board voted unanimously to put the proposals out for comment.

"Only stable if they can be reliably and promptly redeemed"

Fed Governor Michael Barr, who has long pushed for strong stablecoin safeguards, underlined what's at stake. "Stablecoins will only be stable if they can be reliably and promptly redeemed at par in a range of conditions," he said, including during periods of market stress and strain on an individual issuer or its related entities.

Barr also used the moment to push for stronger protections, flagging the risk of runs and gaps in anti-money-laundering safeguards. Those concerns point to the two biggest worries regulators have about stablecoins: that a loss of confidence could trigger a rush of redemptions, and that tokens could be used to move illicit money.

What happens next

The public has 60 days to submit comments once the proposals are published in the Federal Register. Banks, crypto companies, consumer groups and anyone else affected can argue for changes. The Fed will then review the feedback before issuing final rules, which could look different from these drafts.

What it means for crypto users

For everyday users, clear rules could make stablecoins safer and more trustworthy. Full reserve backing in cash-like assets reduces the risk of a token losing its peg. Capital requirements add a buffer. And a formal approval process means issuers are vetted before they launch.

For the industry, regulation brings both opportunity and cost. Clear rules could encourage banks and large institutions to use and issue stablecoins, potentially bringing a wave of new money and legitimacy into the market. But compliance, capital and reporting requirements also raise the cost of doing business, which could favour larger, well-funded issuers over smaller players.

It's also part of a bigger shift. Stablecoins have grown into a market worth hundreds of billions of dollars, and governments around the world are racing to decide how to supervise them. The US, through the GENIUS Act, is now filling in the details.

The bottom line

The Fed's draft rules aim to make sure a stablecoin's "one dollar" really means one dollar: fully backed by safe assets, supported by capital, and redeemable when people need their money. The details can still change during the 60-day comment period, but the direction is clear: stablecoins are moving from the edges of finance into the regulated mainstream.

This article is for information only and is not financial or legal advice. The rules described are proposals and are not final.

Sources: Federal Reserve Board proposals (September 24, 2026), with reporting from The Block, CoinDesk, American Banker and Crowdfund Insider.