The Fed Writes the Rules for Stablecoins: 1:1 Full Backing, Redemptions Within Two Business Days

For years the stablecoin industry insisted "we're safer than banks." This week the Fed turned the word "safe" into enforceable clauses — full reserves, two-day redemption, liquidate if you breach the line.

Three key facts

On September 24, the Federal Reserve Board requested public comment on two proposals establishing a regulatory framework for payment stablecoin issuers under the GENIUS Act (signed into law in July 2025). Core terms: issuers supervised by the Fed must fully back their stablecoins 1:1 with permissible reserve assets (short-term Treasuries and other high-quality liquid assets); the public comment period runs 60 days from publication in the Federal Register.

Capital is charged on a tiered scale for operational risk: 2% on the first $20 billion in stablecoins outstanding, 1.5% on the next $30 billion, and 1% on amounts above $50 billion. The bigger the scale, the lower the rate — a declining structure that effectively hands top issuers an invisible license dividend.

The redemption right is written hardest: issuers must generally process redemptions within two business days; if reserve backing falls below 1:1 they must notify the Fed immediately and choose one of two paths — file a remediation plan to restore reserves, or begin liquidating assets to redeem outstanding stablecoins. A separate proposal designs a tailored application process for supervised banks issuing stablecoins through subsidiaries (business plan, financials, supporting documentation).

Wang Dou's Take

The flavor only comes out when you read the fine print against reality. Two-day redemption plus forced liquidation below the line — these two clauses hand down a death sentence, inside the banking system, to the "algorithmic stablecoin." A coin without 1:1 reserves can't even fill out the application form. Four years after the UST collapse, regulators have finally taken the definition of "stable" back from project whitepapers and written it into federal rules.

That tiered, declining capital charge is the part of the document most easily skimmed over and most worth savoring: 2% → 1.5% → 1%, so every rung up the scale, compliance cost goes down. Translated: the Fed is using price leverage to push stablecoins toward consolidation at the top. The leading issuers are quietly delighted; the survival space of small and mid-size issuers gets run over directly by the capital curve. Call it a regulatory framework — it's also an industry consolidation plan. The regulator isn't just managing risk; it's picking winners for the market.

Now look at the timeline and you see how packed this week's drama is: Wednesday the Fed writes the rules, Thursday Bitget gets hacked for $352 million, and all through September New York is suing Polymarket. The three events together spell out America's real approach to crypto regulation — when an exchange gets robbed, the rules won't be absent, but they won't chase your money back for you either. For issuers, the next 60-day comment period is the true battlefield: the bank camp (SoFi just went live with Mastercard settlement) and the crypto-native camp will fight to the death over every decimal point in the capital curve. On the day the rules are finalized, who's at the table and who's been swept out will all be settled.

Source: Federal Reserve Press Release · American Banker · Banking Dive · PYMNTS