Federal Reserve’s New Stablecoin Rules Demand Full Dollar Backing
- The Federal Reserve proposes that issuers of stablecoins maintain at least $1 in reserve for every $1 issued.
- Issuers must honor redemption requests within two business days and face liquidation if reserves fall below required levels.
- Fed Governor Michael Barr emphasizes the need for clear redemption rights and stronger anti-money laundering measures.
- The GENIUS Act mandates a decision on bank applications within a maximum of 120 days.
The Federal Reserve’s proposed rules aim to stabilize the stablecoin market by ensuring each token is fully backed by permissible reserve assets, such as U.S. dollars and Treasury securities with less than three months to maturity. This regulatory framework seeks to mitigate risks associated with stablecoin issuers failing to meet their financial obligations.
By imposing strict reserve requirements and capital charges, the Fed aims to enhance consumer protection and financial stability in the digital currency space, ensuring reliable redemption of stablecoins even under market stress conditions. (Source)
