Federal Reserve Proposes Capital Requirements for Stablecoin Issuers

The Federal Reserve has announced a proposal that would require payment stablecoin issuers under its supervision to maintain capital reserves proportional to the amount of stablecoins they issue. This regulatory framework, introduced on September 24, aims to mitigate risks associated with stablecoin operations by imposing a capital charge based on the volume of coins in circulation.

Under the proposed rules, a hypothetical issuer with $1 billion in circulation and no revenue from activities outside its reserve assets would incur a baseline operational-risk capital charge of $20 million. This charge would increase with the number of coins issued, creating a direct financial consequence for stablecoin growth. For the first $20 billion of stablecoins, the capital charge would be set at 2%, decreasing to 1.5% for the next $30 billion and 1% for amounts exceeding $50 billion.

Additionally, issuers would be required to maintain reserves equal to the par value of their outstanding coins, with a separate capital charge for uninsured deposit claims. The proposal also introduces a crisis management framework, where issuers must notify the Fed within 24 hours if their reserves fall below the value of their outstanding tokens, initiating a potential liquidation process within 48 hours.

The Fed's proposal is part of a broader regulatory effort to ensure the stability of the stablecoin market, which has seen significant growth and scrutiny in recent years. Comments on the proposal will be accepted for 60 days following its publication in the Federal Register.