Overview The Federal Reserve put its piece of the US stablecoin framework on the table on September 24, asking for public comment on two proposals implementing the GENIUS Act. According to the Board'sOverview The Federal Reserve put its piece of the US stablecoin framework on the table on September 24, asking for public comment on two proposals implementing the GENIUS Act. According to the Board's
US Stablecoin Rules 2026: What the Fed's GENIUS Act Proposal Means for USDT and USDC
Overview
The Federal Reserve put its piece of the US stablecoin framework on the table on September 24, asking for public comment on two proposals implementing the GENIUS Act. According to the Board's announcement, the first proposal would require Board-supervised payment stablecoin issuers to fully back their tokens with permissible reserve assets such as short-term Treasury bills and other high-quality liquid assets, while setting standardized capital requirements, risk management standards and rules for firms that safekeep the assets behind those tokens. The second would create a tailored application process for Board-supervised banks seeking to issue payment stablecoins. The text was published in the Federal Register on September 29 at 91 FR 61580, with comments due by November 30.
One distinction matters before anything else. The rules apply directly to permitted payment stablecoin issuers within the Board's remit, principally subsidiaries of insured state member banks approved to issue, and uninsured state-chartered depository institutions that transition into the federal framework under section 4(d) of the Act. Neither Tether nor Circle sits in that category today. Reading the proposal as the Fed imposing requirements on Tether would be wrong. What deserves attention instead is how the framework, once finalized, reshapes competitive positioning, institutional flows and exchange listing standards around the two dominant dollar tokens.
Key Takeaways
The Board's direct jurisdiction is narrow, but the tying prohibition it is charged with implementing applies to every permitted payment stablecoin issuer regardless of which agency supervises it.
Reserves must fully back outstanding tokens in permissible assets, while capital is split between credit risk from reserve assets and operational risk, with a floor for newly formed issuers indexed to nominal GDP.
Redemption is the provision that touches holders most directly, requiring a published redemption policy and settlement no later than two business days after a valid request.
The statute already bars permitted issuers from paying interest or yield to holders, and the proposal adds a presumption designed to capture indirect arrangements routed through affiliates.
The effect on USDT and USDC runs through competition and market access rather than through the text itself, with the real clock set by the Act's effective date and its three-year transition period.
A Year of Waiting, Then a 104-Page Draft
The Gap Between Statute and Implementation
The GENIUS Act became Public Law 119-27 on July 18, 2025, as the congressional record confirms. Agencies were meant to complete implementing rules within a year, and that schedule slipped. The OCC issued its proposal on March 2, the FDIC board approved prudential standards for its supervised issuers on April 7, and the Treasury unit FinCEN issued a joint proposal with OFAC on anti-money-laundering and sanctions obligations. The Fed's filing completes the main federal set.
Under the statute, the effective date falls on the earlier of 18 months after enactment or 120 days after the primary regulators issue final rules. Even if rulemaking slips further, the framework starts applying by mid-January 2027 at the latest. For issuers and trading venues, the preparation window is closing.
Legislation Stalled, Rulemaking Took Over
The proposal arrives against a legislative standstill. CNBC reported that the Senate's September 15 procedural vote on the Clarity Act failed 49 to 50, well short of the 60 needed, effectively ending the industry's market-structure push for this Congress. With Capitol Hill stalled, the operative rules for dollar tokens are now being written at the agencies.
Governor Michael Barr, in an accompanying statement, framed the objective plainly: stablecoins are only stable if they can be reliably and promptly redeemed at par across a range of conditions, including market stress that pressures even otherwise liquid government debt, and episodes of strain at an individual issuer or its related entities. That sentence explains most of the design choices in the text.
What a Payment Stablecoin Is and Who the Fed Supervises
The Definition Sets the Perimeter
Restating section 2(22) of the Act, the proposal defines a payment stablecoin as a digital asset used or designed to be used as a means of payment or settlement, whose issuer is obligated to convert, redeem or repurchase it for a fixed amount of monetary value and represents, or creates the reasonable expectation, that it will maintain a stable value relative to that amount. Three things are carved out: a national currency, a deposit as defined in the Federal Deposit Insurance Act including one recorded using distributed ledger technology, and a security under the federal securities laws.
Those exclusions carry weight. Tokenized bank deposits fall outside the issuer regime entirely, which gives banks a second path. Dollar tokens marketed on investment returns risk landing in securities territory instead. For readers new to how these instruments sit within the wider crypto structure, MEXC Learn has a primer on stablecoins.
Who Counts as Board-Supervised
The proposal defines a Board-supervised permitted payment stablecoin issuer as covering two groups: subsidiaries of insured state member banks that the Board has approved to issue payment stablecoins, and state-qualified issuers that are uninsured state-chartered depository institutions and have transitioned into the Board's framework under section 4(d). Entities over which the Board holds only backup enforcement authority in unusual and exigent circumstances, or that are subject only to the tying rules, are excluded.
Federal supervision is therefore allocated by charter type. National banks and federal qualified issuers go to the OCC, subsidiaries of state nonmember banks and state savings associations to the FDIC, federally insured credit unions to the NCUA, and subsidiaries of state member banks to the Fed. Which agency you answer to determines which rulebook applies.
One Provision That Reaches Everyone
Part of the proposal has far wider reach. The Board is charged with implementing the tying prohibition in section 4(a)(8), which applies to all permitted payment stablecoin issuers regardless of primary regulator, and subpart E does exactly that while also extending to certain companies unanimously approved by the Stablecoin Certification Review Committee. Any institution planning to bundle a dollar token with its other financial services runs into this one.
Reserves, Capital, Redemption and Custody
Full Backing in Permissible Assets
Board-supervised issuers would have to hold permissible reserve assets fully matching outstanding tokens at all times, valued at GAAP fair value, with diversification and concentration limits, reporting and certification obligations, and defined consequences and remedial measures for shortfalls.
One constraint is easy to miss. The proposal states that payment stablecoins themselves are not permissible reserve assets. Issuers may not lend, nor issue stablecoins as loan proceeds. They may pay network fees to facilitate customer transactions and hold non-stablecoin digital assets for that purpose and for ledger testing, but only in quantities reasonably expected to meet near-term needs.
Capital Split Between Credit and Operational Risk
Capital is the most technical piece. American Banker reported that the Board proposed standardized capital requirements addressing certain credit and operational risks of stablecoin activity. Readings of the text indicate that credit risk capital on reserve assets would be calculated daily and operational risk capital quarterly, with a minimum floor for newly formed issuers that adjusts with nominal US GDP. An analysis by news.bitcoin.com adds that capital charges step down as outstanding issuance grows, and that an issuer still short of its minimum at the end of the following quarter would have to liquidate reserves and redeem its coins. These figures sit inside a proposal, not a final rule, and the final calibration may differ.
The economic implication is what matters. Issuing a dollar token stops being a pure carry business funded by other people's money and becomes an activity that consumes capital. Larger books absorb more equity, and the barrier to entry rises for smaller issuers.
Redemption Becomes an Enforceable Commitment
Proposed section 247.12 would require issuers to publish a redemption policy covering timeframe, fees, minimum redemption quantity and procedures, and would cap timely redemption at two business days from a valid request. An issuer would have to explain how a customer redeems and accept requests for as little as a single token, subject to screening and onboarding, with the Board able to extend the window for safety and soundness or the public interest.
This fills a gap the industry has lived with for years, when redemption eligibility, minimums and turnaround times were set entirely by each issuer's own terms. It is also worth stating the limit: the two-day ceiling governs the issuer's relationship with its direct customers, not the platform terms that apply when a user holds tokens on an exchange.
Custody and Private Keys Get Their Own Subpart
Subpart C implements section 10, reaching Board-supervised persons that provide custodial or safekeeping services for stablecoin reserves, for stablecoins used as collateral, or for the private keys used to issue them. It addresses the custodial property status of covered assets, segregation and the use of omnibus accounts, and excludes self-custody hardware and software. Bringing key management explicitly inside a prudential rulebook is a notable extension of traditional supervision into on-chain infrastructure.
The Bank Application Route and the Wider Regulatory Map
A Clock on the Approval Process
The second proposal governs how an insured state member bank applies for prior approval for a subsidiary to issue payment stablecoins. According to the Board memorandum, the rule restates the statutory process and adds detail on scope and procedure. Readings of proposed section 247.30 indicate the Board would tell an applicant within 30 days whether a filing is substantially complete, with a 120-day decision period running from the date a complete application is submitted, and the statute's deemed-approval provision applying if that period lapses. Applicants would submit a business plan, financial information, policies and capital documentation, with procedures for appeals, hearings and final determinations.
Section 5(h) of the Act is self-executing and worth noting separately: a state member bank's stablecoin-issuing subsidiary needs no additional state charter, license or authorization to do business, which removes a layer of duplicative approval.
Where AML and Sanctions Rules Plug In
Proposed section 247.13(d) folds Bank Secrecy Act, anti-money-laundering and sanctions obligations into the risk management standards, meshing with Treasury's joint proposal that treats permitted issuers as financial institutions for BSA purposes and requires an effective sanctions compliance program. Section 4(a)(6)(B), also self-executing, requires an issuer to have the technological capability to comply with lawful orders, which sets a hard engineering requirement around freeze and seizure functions.
Barr flagged one point of discomfort, namely the requirement that an anti-money-laundering deficiency be significant or systemic before the Board takes supervisory or enforcement action. Internal disagreement of that kind is itself a signal that the final text may move.
What This Means for Bank-Issued Stablecoins
For banks the framework opens a door and draws a boundary at the same time. The door is a defined application process with articulated capital standards and permitted activities. The boundary is that an issuing subsidiary is confined to issuing, redeeming, managing reserves and providing custody, may not lend, and is generally expected not to incur material liabilities beyond stablecoin liabilities or hold significant assets beyond permissible reserves without written Board permission. The result is a deliberately narrow, simplified balance sheet.
The exclusion of tokenized deposits from the payment stablecoin definition offers banks an alternative. For institutions focused on institutional settlement rather than retail distribution, a tokenized deposit may carry less regulatory friction than an issuing subsidiary.
Indirect Effects on USDT, USDC and Exchanges
Circle Has Already Built the Credentials
Circle has moved closest to the emerging regime. Its press release confirms that the OCC granted final approval on July 10, 2026 for First National Digital Currency Bank, N.A., operating as Circle National Trust, which begins by offering fiduciary digital asset custody with reserve management planned as a later capability. Ledger Insights noted that the trust bank does not itself issue USDC, and that Circle has applied to the New York Department of Financial Services for a limited purpose trust company to which it plans to move USDC issuance.
That path puts Circle under the OCC and New York rather than the Fed. The Board's proposal therefore does not bind USDC directly, but it raises the industry-wide compliance baseline, and a higher baseline tends to favor whoever finished the licensing work first.
Tether Faces an Access Question, Not a Drafting Question
Tether sits in a different position. CoinDesk's analysis noted that the Act's three-year transition left roughly two years as of the July 2026 anniversary, after which non-compliant tokens cannot be offered to US persons by digital asset service providers. Tether launched USAT on January 27, 2026 for the US market, issued through federally chartered Anchorage Digital Bank, but adoption remains small relative to global USDT, and the company has not publicly detailed how it intends to bring USDT itself into conformity. USDT's stated route is the foreign issuer pathway, which requires a Treasury reciprocity determination.
The status distinction matters. Tether says it is working toward compliance, but no confirmed timeline has been published and no reciprocity determination has been made. Describing USDT as either already compliant or certain to leave the US market goes beyond what is currently established.
Exchanges Are Written Into the Statute
For trading venues the binding provision is section 3(b), which prohibits digital asset service providers from offering or selling a payment stablecoin to a person in the United States unless the issuer is a permitted issuer or a qualifying foreign issuer. Treasury's August proposal further defines who counts as issuing or selling in the US. In practice, what determines whether a dollar token stays listed on a US venue will be the issuer's licensing status rather than its trading volume.
The likely consequence is structural segmentation, with US-facing venues concentrating in licensed issuers while offshore markets continue to run on the deepest liquidity. DefiLlama data shows USDT and USDC together accounting for well over four-fifths of stablecoin supply, so any regulatory reallocation of share is large enough to change pair depth and cross-venue spreads. Traders can follow supply and pricing across dollar tokens on the MEXC stablecoin market page, and watch relative pricing between the majors directly on MEXC.
The regulatory perimeter is being redrawn, and the relative price of the two leading digital dollars is being repriced with it, check where the USDC/USDT pair is trading right now
Timeline, Risks and What to Watch
Dates Worth Marking
The comment period closes on November 30, when submissions from banking groups, crypto firms and consumer organizations become public, with capital calibration, the redemption window and the anti-money-laundering threshold the likeliest flashpoints. The statutory effective date falls no later than January 18, 2027, and the three-year transition for platform access runs to mid-2028, which is the real deadline for foreign issuers and trading venues. Proposed section 247.51 also asks a state-qualified issuer whose consolidated outstanding issuance crosses ten billion dollars to notify the Board within five calendar days, which makes that threshold a concrete marker for when an issuer moves toward federal oversight.
Three Market Structures
If the rules land broadly as proposed, the US stablecoin market concentrates among a smaller set of licensed issuers, bank-affiliated entrants use their capital and custody capabilities to compete, and industry margins compress under capital and compliance costs while product predictability improves.
If the final rules are materially loosened, whether on capital charges or the redemption window, entry barriers fall and competition intensifies, but holder protection is correspondingly thinner.
If regulation and market reality fall out of step, with reciprocity determinations unresolved as the transition period expires, liquidity between US and offshore venues could fragment, widening arbitrage opportunities alongside operational and compliance risk.
Principal Risks
Rule uncertainty comes first, since everything described here is a proposal and final text may diverge. Fragmentation risk follows, as inconsistencies among four federal agencies and state regulators raise both arbitrage opportunities and compliance costs. Concentration risk is structural, given how few issuers hold the market, so any regulatory shift in share can amplify short-term liquidity swings. Execution risk closes the list, because how redemption deadlines and freeze capabilities perform in practice on public ledgers remains untested.
Exclusive View from James Mitchell
For James Mitchell, the significance of this proposal is not in any single clause but in what it does to the business model. Stablecoin issuance has been a carry trade: take in dollars, buy short Treasuries, pay holders nothing. Introducing capital requirements changes that equation, because a larger book now consumes more equity and the marginal return on scale declines. That tilts the field toward bank-affiliated participants with balance sheets and supervisory relationships already in place, and pressures pure-play issuers whose economics depend on scale.
The most common misreading will be to map the Fed's text straight onto USDT and USDC. The rules bind Board-supervised issuers. Circle's regulatory path runs through the OCC and New York, and Tether's runs through the foreign issuer provisions. What actually constrains those two is section 3(b)'s limit on what platforms may offer to US persons, plus the three-year clock, not this particular filing. Getting the source of the pressure wrong leads to getting the timing wrong, typically by overstating the near-term shock and understating what happens around 2028.
Three observable variables are worth tracking from here. The first is licensing status, meaning which entity holds which charter and where issuance legally sits, because that determines future listing eligibility on US venues. The second is the USDT and USDC supply split on DefiLlama, which tends to move ahead of headlines if regulatory expectations start steering allocations. The third is listing and delisting notices from major exchanges, since venue-level compliance decisions usually arrive before final rules do. From a risk management standpoint, anyone holding a large stablecoin balance should treat issuer entity, regulatory jurisdiction and redemption terms as three separate risk dimensions rather than assuming a dollar token is cash.
On a longer view, the pattern rhymes with the regulatory absorption of money market funds in the 1970s and 1980s. A cash-like instrument grows outside the banking perimeter, reaches a size that invites prudential rules, and the sector that emerges is more concentrated, lower margin and more standardized. Stablecoins look likely to follow that arc. The broader lesson for crypto is that competition for on-chain dollar liquidity is shifting from headline yield toward licensing and redemption certainty, and that shift will rearrange where exchanges, issuers and fintech firms sit in the chain.
FAQ
Do the Fed's new rules regulate USDT and USDC directly?
No. The proposal applies to permitted payment stablecoin issuers within the Board's supervisory remit, principally stablecoin-issuing subsidiaries of insured state member banks and uninsured state-chartered depository institutions that transition into the federal framework. Circle's USDC issuing entity answers to the OCC and New York, while Tether is pursuing the foreign issuer route. Both are affected through competition and market access rather than through the text itself.
What counts as a payment stablecoin?
Under section 2(22) of the GENIUS Act, it is a digital asset used or designed to be used for payment or settlement whose issuer must convert, redeem or repurchase it for a fixed amount of monetary value and represents that it will hold a stable value. National currencies, deposits including tokenized deposits, and securities are excluded. That carve-out is why tokenized bank deposits and yield-bearing dollar tokens follow different regulatory paths.
What does the proposal require on redemption?
Proposed section 247.12 would require a published redemption policy covering timeframe, fees, minimum redemption quantity and procedures, with timely redemption capped at two business days after a valid request. Issuers would have to accept requests for as little as one token, subject to screening and onboarding, and the Board could extend the period for safety and soundness or the public interest. The cap governs the issuer relationship, not exchange withdrawal terms.
Can stablecoin issuers pay interest to holders?
No. Section 4(a)(11) bars permitted issuers from paying holders any form of interest or yield, in cash, tokens or other consideration, solely in connection with holding, using or retaining the token. The proposal adds a presumption covering arrangements with affiliates that could achieve the same result indirectly, following the approach the OCC took in its own rulemaking. This has been the longest-running point of contention between banks and crypto firms.
How does a bank apply to issue a stablecoin?
An insured state member bank must obtain prior Board approval for a subsidiary to issue. Under the proposed procedures the Board would confirm within 30 days whether a filing is substantially complete, and a 120-day decision clock would run from the date a complete application is submitted, with the statute's deemed-approval provision applying if that lapses. Applicants submit a business plan, financial information, policies and capital documentation, with appeal and hearing procedures available.
Will USDT be delisted from US exchanges?
No official decision supports that conclusion today. The Act provides a three-year transition, after which digital asset service providers may not offer non-compliant stablecoins to US persons. Tether has launched USAT for the US market through Anchorage Digital Bank and is pursuing foreign issuer status for USDT, but the required reciprocity determination has not been made and no full compliance timeline has been published. Official announcements should be the reference point.
When do these rules actually take effect?
Comments close on November 30, 2026, and no date has been set for final rules. The statute takes effect on the earlier of 18 months after enactment or 120 days after final regulations, which puts the outer limit at January 18, 2027. The separate three-year transition for platform distribution runs to mid-2028, which is the operative deadline for foreign issuers preparing for the US market.
Disclaimer
This article is provided for general market and policy information only and does not constitute investment advice, financial advice, legal advice, tax advice or a recommendation to trade. Every regulatory document referenced here is a proposal rather than a final rule, and the text, scope, timing and specific figures may change before adoption, so readers should treat the agencies' final published documents as authoritative. Prices of crypto assets, equities and other related financial assets can move sharply, and past performance, technical indicators and on-chain data do not guarantee future results. Readers should conduct their own research and make decisions based on their own financial circumstances, investment objectives and risk tolerance, seeking qualified professional advice on legal and compliance questions. The MEXC Crypto Pulse team accepts no liability for any direct or indirect loss arising from the use of this information.
About the Author
James Mitchell specializes in technical analysis, market trends, and trading strategies for both Bitcoin and altcoins. Based in London, he has over 10 years of experience in financial markets. Before joining MEXC Learn, James worked as a senior analyst at a leading European investment firm, where he developed expertise in risk management and quantitative trading. His transition to cryptocurrency markets began in 2017, and he has since become recognized for his data-driven approach. He holds a Master's degree in Financial Economics from the London School of Economics. His analytical approach combines traditional technical analysis with on-chain metrics to provide readers with actionable insights.
His areas of expertise span technical analysis, market trends and cycles, trading strategies, Bitcoin and altcoin analysis, and risk management.
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The articles shared on this page are sourced from public platforms and are provided for reference only. They do not represent the position or views of MEXC. All rights belong to James Mitchell. If you believe any content infringes upon the rights of a third party, please contact [email protected] for prompt removal. MEXC does not guarantee the accuracy, completeness, or timeliness of any content and is not responsible for any actions taken based on the information provided. The content does not constitute financial, legal, or other professional advice, nor should it be interpreted as a recommendation or endorsement by MEXC. For expert insights and in-depth analysis, visit MEXC Learn.
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