The U.S. Federal Reserve has taken another step toward implementing the GENIUS Act, proposing regulations that cover stablecoin issuance as well as programs that provide rewards or yield to stablecoin holders.
The Fed released two proposals Thursday as part of the broader federal effort to establish a regulatory framework for stablecoin issuers under the Guiding and Establishing National Innovation for U.S. Stablecoins Act.
The proposals will be available for public comment for 60 days. They would establish regulatory safeguards for stablecoin issuers and create a framework allowing banks supervised by the Fed to issue stablecoins.
The GENIUS Act directed U.S. banking regulators and the Treasury Department to establish implementing regulations by July 2026. That deadline has passed, although federal agencies have accelerated their work on the framework in recent months.
The Fed’s treatment of stablecoin rewards largely mirrors an approach proposed by the Office of the Comptroller of the Currency. The OCC has also addressed the GENIUS Act’s restriction on issuers paying interest or yield to stablecoin holders.
Under the Fed’s proposal, certain arrangements involving third parties would be presumed to qualify as prohibited interest or yield payments. The central bank said its approach is consistent with the OCC’s proposed rules.
The proposals have not yet been finalized, but they could leave a narrow avenue for crypto platforms to provide certain stablecoin incentives similar to rewards offered by credit-card companies.
Stablecoin rewards were a contentious issue during negotiations over the Digital Asset Market Clarity Act. Companies such as Coinbase had faced questions over how much they could offer users, but the proposed changes in that legislation did not advance. As a result, the GENIUS Act remains the main federal framework governing stablecoin rewards.
The Fed will review public feedback before revising and finalizing the proposals. Such regulatory processes typically take several months and can sometimes extend considerably longer.
Fed Proposal Addresses Reserves and Bank-Issued Stablecoins
The first proposal focuses on capital and reserve requirements intended to ensure stablecoins are backed by highly liquid assets. It also aims to ensure issuers maintain sufficient financial resources to withstand periods of market stress.
The proposal further defines permitted stablecoin activities for banks supervised by the Federal Reserve and contains the provisions addressing stablecoin rewards.
The second proposal establishes the process for Fed-regulated banks seeking approval to issue stablecoins. Banks would be required to submit materials such as a business plan, financial information, policies, procedures and other relevant documentation.
Fed Governor Michael Barr said stablecoins must be capable of being redeemed at their full value quickly and reliably across a range of market conditions. He emphasized that this requirement is particularly important during periods of stress, when even liquid government securities can face valuation pressure or when an issuer and its affiliates experience financial difficulties.
The Treasury Department proposed its own GENIUS Act implementation rules last month, including definitions for U.S. stablecoin issuance and identifying the entities that would fall under the legislation.
The Federal Deposit Insurance Corp. began developing its portion of the framework in December. In June, several federal agencies also proposed customer-identification requirements for stablecoin issuers modeled on procedures used by other regulated financial institutions.
