The Federal Reserve has proposed rules for bank-issued payment stablecoins that would require each $1 token to be backed by at least $1 in approved reserve assets and generally redeemed within two business days. According to Odaily, the proposal would also require issuers to notify the Fed if reserves fall short and restore full backing, or else liquidate reserves and redeem the dollar-pegged tokens.

Approved reserve assets could include U.S. dollars, balances at Federal Reserve banks, certain bank deposits, U.S. Treasurys with remaining maturities of up to 93 days, eligible repurchase agreements, and qualifying investment funds. Some tokenized forms of these assets may also be included.

The Fed also proposed standardized capital charges for operational and some credit risks, with a 2% capital charge on the first $2 billion of outstanding stablecoins and 1% on amounts above $5 billion. Another proposal would allow insured state member banks to apply to set up subsidiaries that issue payment stablecoins, and the Fed would have 120 days to decide once an application is substantially complete under the GENIUS Act.

Fed Governor Michael Barr said stablecoins should be redeemable at par in a reliable and timely manner across different market conditions and when issuers face problems. He also said the final rule should clearly define a general right of redemption. Barr added that he was concerned about a threshold that would require anti-money-laundering deficiencies to be “significant or systemic” before triggering regulatory or enforcement action. The public comment period will run for 60 days after publication in the Federal Register.