Fed Advances GENIUS Act Rules for U.S. Stablecoins

The U.S. Federal Reserve has proposed new regulations to implement last year’s GENIUS Act, including rules addressing programs that offer rewards or yield to stablecoin holders.

The central bank introduced two proposals on Thursday as part of the broader, multi-agency effort to establish oversight for stablecoin issuers under the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act.

Both proposals will remain open for public comment for 60 days. They would establish the regulatory framework supporting stablecoin issuance and create procedures allowing banks supervised by the Fed to issue their own stablecoins.

The GENIUS Act required U.S. banking regulators and the Treasury Department to finalize implementing regulations by July 2026. The agencies have moved beyond that statutory deadline, although regulators have made considerable progress toward completing the framework in recent months.

The Fed’s approach to stablecoin rewards is also broadly aligned with a proposal from the Office of the Comptroller of the Currency (OCC), which addressed the law’s restrictions on issuers providing interest or yield to people holding stablecoins.

The Fed said certain arrangements involving third parties would be presumed to constitute prohibited interest or yield payments. The central bank added that its proposed approach is consistent with the OCC’s position.

Although the rules have not been finalized, the proposals appear to leave a limited path for crypto platforms to provide stablecoin incentives that resemble rewards offered through traditional credit-card programs.

The issue of how much companies such as Coinbase could offer stablecoin users became a major point of debate during discussions surrounding the Digital Asset Market Clarity Act, which ultimately failed to advance. With those proposed changes unsuccessful, the GENIUS Act remains the primary federal law governing stablecoin reward programs.

The Fed’s proposals must now go through a public-comment process before regulators can make revisions and issue final rules. That process generally takes several months, although major regulations can take considerably longer.

The first proposal focuses on capital and reserve requirements designed to ensure stablecoins are backed by highly liquid assets and that issuers maintain sufficient financial strength during periods of market stress. It also defines permissible stablecoin-related activities for banks supervised by the Federal Reserve and contains the provisions covering stablecoin rewards.

The second proposal establishes the process for a regulated bank seeking authorization to issue its own stablecoin. Applicants would need to provide information including a business plan, financial data and relevant policies, procedures and other supporting documents.

Fed Governor Michael Barr said stablecoins can only maintain their stability if holders are able to redeem them at par value quickly and reliably under different market conditions. He noted that this requirement becomes particularly important during periods of financial stress, when even liquid government debt can come under pressure or when an individual issuer or affiliated entities experience financial strain.

The Treasury Department advanced another part of the GENIUS Act implementation process last month by proposing definitions for U.S. stablecoin issuance and identifying the entities that would be subject to the law.

The Federal Deposit Insurance Corp. began developing its portion of the regulatory framework in December, making it one of the first federal agencies to start translating the law into regulations. In June, several federal agencies also proposed requirements that would make stablecoin issuers follow customer-identification procedures similar to those used by other regulated financial institutions.

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