The Federal Reserve Board on Thursday, September 24, requested public input on two proposals designed to impose banking-like regulatory requirements on payment stablecoin issuers. The proposals would require issuers to maintain full reserve backing with eligible assets, adhere to standardized capital requirements, ensure safe custody arrangements, and obtain approval through procedures outlined in the GENIUS Act.
The public comment period will last 60 days following publication in the Federal Register. The framework specifies that eligible backing assets include short-term Treasury securities and other high-quality liquid assets. Applicants seeking approval must submit business plans and financial documentation, with provisions for appeals and hearings built into the process.
Federal Reserve Governor Michael S. Barr expressed support for the reserve and capital measures but flagged a potential enforcement gap. He noted uncertainty about how a "significant or systemic" threshold in the Fed's separate July proposal to revise bank anti-money-laundering (AML) program requirements could affect the central bank's supervisory capacity.
Market Size and Economic Effects
The stablecoin market has grown substantially, with the Bank for International Settlements estimating the market at approximately $300 billion in 2026, with 98 percent denominated in U.S. dollars. S&P Global Market Intelligence projects the market will reach $434 billion by 2028, driven by applications in cross-border payments, treasury management, and capital market tokenization.
The flow of stablecoin reserves into Treasury bills could increase demand for short-term U.S. securities, though the total effect will depend on the underlying drivers of stablecoin reserve growth. Stricter capital and custody regulations may also raise compliance costs and barriers to entry for new issuers.
The International Monetary Fund found that existing payment companies experienced market value losses during the critical vote on the GENIUS Act, with cross-border firms facing greater declines.
Regulatory Consistency and Implementation Timeline
A June review by the Bank for International Settlements found stablecoin regulation fragmented across jurisdictions, warning that uneven implementation could create regulatory-arbitrage opportunities and complicate supervision. Global on-chain crypto activity has remained resilient, slipping only 1.6 percent despite broader market volatility.
The Treasury has identified January 18, 2027, as the expected effective date for the GENIUS Act. However, the statute permits an earlier implementation 120 days after primary federal stablecoin regulators issue final rules, prompting agencies including the Fed to move forward with rulemaking.
