Federal Reserve Unveils Proposed Framework for GENIUS Act Stablecoins

The U.S. Federal Reserve has taken another step toward implementing the GENIUS Act, unveiling two proposed rules aimed at establishing oversight standards for stablecoin issuers and banks seeking to launch stablecoins.

The proposals, released Thursday, will remain open for public comment for 60 days. They are designed to create a regulatory framework for stablecoin activities under the Guiding and Establishing National Innovation for U.S. Stablecoins Act.

The GENIUS Act requires federal banking regulators and the Treasury Department to establish implementing regulations. Although the law set a July 2026 deadline, agencies have continued working on the rules beyond that date.

One major focus of the Fed’s proposals is the treatment of stablecoin rewards. The central bank’s approach largely mirrors a proposal from the Office of the Comptroller of the Currency, including a presumption that certain arrangements involving third parties could amount to prohibited interest or yield payments.

The framework could still leave a narrow opening for incentives that resemble traditional credit-card rewards, although the proposals are not yet final.

Stablecoin rewards became a contentious issue during negotiations over the Digital Asset Market Clarity Act. That legislation ultimately failed to advance, leaving the GENIUS Act as the key federal framework governing how stablecoin issuers can structure rewards.

The Fed said its first proposal would establish capital and reserve standards designed to ensure stablecoins remain backed by highly liquid assets. It would also define stablecoin-related activities that Fed-supervised banks could conduct and address the treatment of rewards.

The second proposal would establish procedures for banks seeking authorization to issue stablecoins. Applicants would be required to submit information including a business plan, financial details and relevant policies and procedures.

Fed Governor Michael Barr emphasized that stablecoins must be capable of being redeemed at face value quickly and reliably, including during periods of market stress. He noted that market pressure can affect even highly liquid government securities and create additional risks for issuers and affiliated entities.

Other federal agencies are also advancing their parts of the GENIUS Act framework. The Treasury Department recently proposed rules defining U.S. stablecoin issuance and identifying entities subject to the law.

The FDIC began its regulatory process in December, while several agencies proposed customer-identification requirements in June that would place stablecoin issuers under procedures similar to those followed by other regulated financial institutions.

The Fed will review public feedback before revising and finalizing the proposals, a process that could take several months or longer.