On September 24, the Federal Reserve Board requested comment on two proposals for payment-stablecoin issuers it supervises under the GENIUS Act, the U.S. federal statute establishing a regulatory framework for payment stablecoins. The proposals are not final: their scope is limited to issuers already under the Board's supervision, and the public comment process could still reshape the eventual rules.

A Reserve Is Not a Complete Redemption System

A payment stablecoin can be fully backed and still confront a practical problem: whether its reserve assets, custody arrangements and banking partners can meet redemption requests promptly under pressure. That question goes beyond composition of a reserve. A holder needs to know whether the assets are sufficiently liquid, who safeguards them, whether the issuer can withstand operational losses or outages, and how the token can be exchanged for dollars when demand for redemption increases.

Governor Michael Barr placed that issue at the center of his statement on the proposals. Stablecoins, he said, can be considered stable only when they can be reliably and promptly redeemed at par across a range of conditions, including market stress and strain at the issuer or related entities. Barr also said universal redemption rights should be made clear in the final framework.

What the Fed Is Proposing

The first proposal would require issuers within the Fed's supervisory scope to maintain full backing with permissible reserve assets, including short-term Treasury bills and other high-quality liquid assets. It would also establish standardized capital requirements for the credit and operational risks connected with payment-stablecoin activity.

The same proposal sets out requirements for firms that safeguard the assets backing a stablecoin. The separate custody rules reflect a practical point: reserves support redemption only when the assets are protected, controlled and available when users need them.

The second proposal addresses market entry. A bank seeking approval for a subsidiary to issue payment stablecoins would need to submit a business plan and financial information, and the proposal outlines procedures for hearings, appeals and final determinations.

A Token Can Move All Day While Redemption Waits

Reserve assets are only useful if the systems connecting tokens to bank dollars are available when users need them. Stablecoin transfers can settle at any hour, while the steps surrounding them may still depend on conventional financial infrastructure. A user may first send money through a bank before an issuer creates tokens. At the other end, a recipient who needs dollar funds in a bank account may have to redeem the token through the issuer and its banking partners. Compliance checks, reserve transfers and settlement windows can all shape that process. In other words, onchain transfers do not guarantee instant access to cash.

Coindoo previously examined this gap in its look at stablecoins and the global payments rebuild. For users, speed should be measured across the full journey from a token transfer to usable bank money, including redemption and settlement. That operational question applies across the market, while the Fed's legal proposal applies to only one group of issuers.

Which Stablecoins Would These Rules Affect?

The proposals matter most to banks and bank-supervised firms considering an issuance route under the Federal Reserve. They do not automatically set the operating rules for every existing dollar stablecoin, and other federal and state supervisory routes may apply to different issuers. Which rulebook governs a given token therefore depends on which regulator supervises its issuer. The result is a layered U.S. framework: the Fed's proposal defines conditions for one bank-supervised model rather than creating a single rulebook for the entire stablecoin market.

Even within that limited scope, the proposal could shape how banks approach stablecoin issuance for institutional payments, treasury management and settlement.

Stronger Safeguards May Also Raise the Cost of Issuance

The proposed requirements would shape more than a bank's compliance checklist. They could also determine whether issuing a payment stablecoin makes economic sense. Clearer reserve, capital and safeguarding standards could make a bank-issued stablecoin easier for institutions to assess, yet they may also make the product more expensive to operate. Limits on eligible reserve assets can reduce flexibility, capital requirements tie up resources, and custody, compliance and redemption systems require continuing investment. The safeguards may strengthen confidence, yet they can influence which banks decide that an issuance program is commercially viable.

That tension sits inside the broader move toward digital dollars being used for tasks beyond crypto trading. Coindoo recently explored why crypto's next growth phase may be built on dollars rather than Bitcoin. For that growth to be durable, issuers need systems that can support payment use, reserve management and redemption at the same time.

Confidence Depends on the Route Back to Dollars

A stablecoin does not need to trade below one dollar before weaknesses become visible. Delays, restricted redemption access, operational outages or uncertainty over reserve custody can undermine confidence first. The Federal Reserve's proposal directs attention to the full chain behind a payment stablecoin: permissible reserves, capital, custody, operational resilience and the holder's ability to redeem.

Under the Fed's release, the comment period is scheduled to close 60 days after the notices are published in the Federal Register, and the final framework could still change. The publication date will set the exact deadline, so the window for input is not yet fixed, and one marker of the final framework will be whether it writes universal redemption rights into the rules, as Barr urged. For users, the practical question remains straightforward: can the issuer honor a redemption request promptly and at par when confidence is under pressure?

This article is provided for informational purposes only and does not constitute legal, financial or investment advice. The Federal Reserve proposals are not final rules and may change following public comment.