The GENIUS Act creates a regulatory framework for "payment stablecoins"—digital assets designed to be used as means of payment or settlement. Issuers must convert or redeem them for a fixed amount of monetary value and represent that they will maintain a stable value relative to that amount. The law excludes national currencies, deposits (including those recorded on distributed ledger technology), and securities from this framework.
Only permitted payment stablecoin issuers (PPSIs) can issue payment stablecoins in the United States. Digital asset service providers—entities that exchange digital assets for money, transfer them, act as custodians, or participate in digital asset financial services—cannot offer or sell payment stablecoins unless the issuer is a PPSI or a foreign payment stablecoin issuer meeting certain requirements. Digital asset service providers cannot offer non-PPSI stablecoins starting July 18, 2028. The ban on offering stablecoins issued by foreign payment stablecoin issuers that do not meet the Act's requirements is already in effect.
The Federal Reserve's proposed regulations address Board-supervised PPSIs, which include subsidiaries of State member banks, and State-qualified payment stablecoin issuers subject to the Board's authority under sections 4 or 7 of the GENIUS Act. The rules cover permissible and prohibited activities, reserve assets, redemption and fees, risk standards, audits and reports, and capital requirements. The Board proposes to implement a prohibition on tying—the practice of conditioning the provision of one service on the purchase of another—that applies to all PPSIs regardless of which regulator oversees them. The tying prohibition appears in section 4(a)(8) of the GENIUS Act.
The proposed rule includes separate provisions for Board-supervised custodians, who must meet requirements for covered asset custodial property, keep assets separate, and report. The regulations exclude self-custody hardware and software from custodian requirements. Custodians cannot use omnibus accounts for covered assets without meeting specific separation requirements.
The GENIUS Act takes effect on the earlier of 18 months after Congress enacted it (January 18, 2027) or 120 days after the primary Federal payment stablecoin regulators issue final implementing regulations. The Board anticipates updating these regulations as stablecoin business practices evolve. The Board is also considering whether existing regulations that impose different requirements at different asset thresholds should be amended to exclude stablecoin reserves from asset calculations. The Board notes that many aspects of the proposed rule resemble notices of proposed rulemaking released by the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and National Credit Union Administration to implement their responsibilities under the GENIUS Act.
The proposed rule addresses State-qualified permitted payment stablecoin issuers, including a transition and waiver process for uninsured State-chartered depository institutions. The Board proposes to include unusual and exigent circumstances enforcement authority for these entities. The Board also proposes amendments to Parts 217, 208, 211, 225, and 263 of the Code of Federal Regulations to harmonize existing rules with the GENIUS Act framework.
Comments can be submitted through the Federal Reserve's website at https://www.federalreserve.gov/apps/proposals/, by mail to Benjamin W. McDonough, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW, Washington, DC 20551, by hand delivery to the same address, or by email with the docket number in the subject line. Comments will be made publicly available without modification and may be viewed electronically or in person at Room M-4365A, 2001 C Street NW, Washington, DC 20551, between 9 a.m. and 5 p.m. on Federal business weekdays. Commenters should not include confidential information that would be inappropriate for public disclosure.
The Board has designated multiple contacts across its Division of Supervision and Regulation and Legal Division. Juan Climent, Deputy Associate Director, can be reached at (202) 460-2180. Other contacts include Jeff Ernst, Manager, at (202) 369-9439; Christopher Anderson, Principal Economist, at (202) 821-7114; Nadya Zeltzer, Lead Financial Institution Policy Analyst, at (202) 452-3164; Christopher Powell, Lead Financial Institution Policy Analyst, at (202) 507-2831; and Francis Kuo, Lead Financial Institution Policy Analyst, at (202) 339-7041. From the Legal Division, Asad Kudiya, Associate General Counsel, can be reached at (202) 475-6358. Users of TTY-TRS should call 711 from any telephone in the United States or (202) 263-4869.
General information, not legal, immigration or tax advice. Confirm the details with Federal Reserve System before you act.
