The Fed's stablecoin proposals put capital behind the plumbing, not the reserve
The Federal Reserve asked for public comment on two proposals on 24 September, setting out its GENIUS Act framework for Board-supervised payment stablecoin issuers. Three things worth reading twice.
1. Full backing and capital answer two different questions. The first proposal would require issuers to fully back their stablecoins with permissible reserve assets such as short-term Treasury bills and other high-quality, liquid assets - and then adds standardized capital requirements addressing credit and operational risk. If the liability were truly matched, there would be nothing left to capitalise. So that capital is aimed somewhere else: at the issuer's own machinery.
2. That changes what a reserve attestation proves. An attestation is evidence about the asset side on a cut-off date. It says nothing about whether a redemption queue can actually be processed. The disclosure that would match this rule is operational, not just compositional.
3. The second proposal turns bank issuance into an application, requiring a business plan and financial information among other documents. A capital standard can be engineered toward; a plan review cannot. So the open question is what reviewers ask for, and how long the clock runs.
Comments run 60 days from publication in the Federal Register. Watch the review criteria, not just the percentages.
Not financial advice. Do your own research.
#Stablecoin #Regulation
The Federal Reserve asked for public comment on two proposals on 24 September, setting out its GENIUS Act framework for Board-supervised payment stablecoin issuers. Three things worth reading twice.
1. Full backing and capital answer two different questions. The first proposal would require issuers to fully back their stablecoins with permissible reserve assets such as short-term Treasury bills and other high-quality, liquid assets - and then adds standardized capital requirements addressing credit and operational risk. If the liability were truly matched, there would be nothing left to capitalise. So that capital is aimed somewhere else: at the issuer's own machinery.
2. That changes what a reserve attestation proves. An attestation is evidence about the asset side on a cut-off date. It says nothing about whether a redemption queue can actually be processed. The disclosure that would match this rule is operational, not just compositional.
3. The second proposal turns bank issuance into an application, requiring a business plan and financial information among other documents. A capital standard can be engineered toward; a plan review cannot. So the open question is what reviewers ask for, and how long the clock runs.
Comments run 60 days from publication in the Federal Register. Watch the review criteria, not just the percentages.
Not financial advice. Do your own research.
#Stablecoin #Regulation