The Federal Reserve published proposed rules for stablecoins in September 2026 under the framework established by the GENIUS Act — the Guiding and Establishing National Innovation for US Stablecoins Act — which became law earlier this year. The Fed's proposals address the reserve requirements, capital standards, and organizational structure for nonbank stablecoin issuers seeking federal authorization. The 60-day comment window is open. The fight over what counts as "interest" is already shaping up as the most consequential dispute in the comment record.
What the GENIUS Act Established
The GENIUS Act created a federal licensing pathway for "payment stablecoin" issuers — entities that issue dollar-denominated tokens fully backed by permitted reserves (Treasury bills, central bank deposits, and certain other high-quality liquid assets). The Act divided supervision between the Federal Reserve (for nonbank issuers above a defined threshold) and state regulators (for smaller issuers who can opt for state licensing). It explicitly prohibited algorithmic stablecoins — tokens whose peg is maintained by protocol mechanisms rather than actual reserves — from claiming the "payment stablecoin" designation.
The GENIUS Act is the statutory foundation. The Fed's September proposals are the implementing regulations — the specific requirements that determine whether a stablecoin issuer can actually obtain and maintain a federal license under that framework.
The Reserve and Capital Requirements
The Fed's proposals establish that permitted payment stablecoin issuers must hold reserves equal to 100% of outstanding tokens, composed entirely of permitted assets: overnight Treasury repos, Treasury bills with maturity under 93 days, and deposits at Federal Reserve Banks. No duration risk, no credit risk, no equities. The reserve composition is effectively identical to a government money market fund — which is by design. The stablecoin reserve framework is modeled on the most conservative money market fund structure, ensuring that a run on any individual stablecoin issuer cannot be caused by illiquid or impaired reserves.
Capital requirements beyond the reserve add a buffer: licensed issuers must maintain capital equal to at least 3% of outstanding tokens, held separately from reserves, to absorb operational losses without touching the reserve pool. Liquidity requirements mandate that a defined percentage of reserves be available for immediate withdrawal at any time.
| Reserve Component | Permitted? | Why |
|---|---|---|
| Overnight Treasury repos | ✅ Yes | Zero credit risk, immediate liquidity |
| Treasury bills (≤93 days) | ✅ Yes | Short duration, no credit risk |
| Federal Reserve deposits | ✅ Yes | Central bank — zero counterparty risk |
| Commercial paper | ❌ No | Credit risk — excluded from permitted assets |
| Corporate bonds | ❌ No | Credit and duration risk |
| Equities or crypto | ❌ No | Volatility risk — incompatible with 1:1 peg |
The Interest Prohibition — and the Fight Over "Rewards"
The GENIUS Act explicitly prohibits licensed payment stablecoin issuers from paying "interest" to holders. The legislative intent is to preserve a distinction between payment stablecoins (for transactions) and money market funds (for investment yield) — preventing stablecoins from becoming unregulated bank accounts that compete with FDIC-insured deposits.
The fight in the comment record is over whether "rewards" programs — points, loyalty benefits, cashback on transactions — constitute "interest" under the Act's definition. Several stablecoin issuers have built business models that include yield-like features structured as rewards programs rather than explicit interest payments. If the Fed's final rules classify those programs as prohibited interest, it eliminates a significant revenue and user acquisition model for the industry.
The statutory text defines "interest" as any payment or return "based on the time value of money or the holding of a payment stablecoin." That definition is broad enough to capture rewards programs that scale with holding periods or transaction volumes — and it is narrow enough to potentially exclude flat-rate cashback programs that do not scale with time. The Fed's final interpretation of this boundary will determine the business models of most major stablecoin issuers.
Why This Matters for RWA Tokenization
Stablecoins are the settlement currency for most tokenized RWA transactions. When an investor buys BUIDL, they pay with USDC or USDT. When they receive yield from a tokenized private credit product, it is typically paid in a stablecoin. When a Tokenized Securities Venue settles a trade, the cash leg is a stablecoin.
The GENIUS Act and Fed reserve requirements determine whether the stablecoins used for RWA settlement are backed by high-quality liquid assets or by riskier alternatives. For institutional RWA investors — particularly those subject to CFTC or banking regulation — the reserve composition of their settlement currency matters. A stablecoin backed entirely by overnight Treasury repos is a fundamentally different counterparty risk than one backed by commercial paper or corporate bonds.
The proposed rules move the stablecoin infrastructure that underpins RWA settlement toward the most conservative possible reserve structure — which is good for institutional confidence in the plumbing, even if it constrains the business models of stablecoin issuers who relied on reserve yield to subsidize user acquisition.
→ The yield gap — why Treasury-backed reserves matter
→ The post-CLARITY regulatory stack — where GENIUS fits
→ Remittances — stablecoins as payment infrastructure