The U.S. Federal Reserve has taken steps toward implementing the GENIUS Act through new regulatory proposals, particularly addressing oversight of stablecoin yield programs.
Federal Reserve officials introduced two comprehensive rulemakings on Thursday aimed at fulfilling the regulatory obligations outlined in last year’s Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. These initiatives align with ongoing efforts across multiple federal agencies to finalize stablecoin regulations.
One of the proposals specifically targets the contentious area of stablecoin rewards, with the central bank indicating its intention to mirror guidelines previously put forward by the Office of the Comptroller of the Currency.
These draft rules, now available for a 60-day public comment period, are designed to establish the legal framework supporting stablecoin issuance and define operational procedures for banks under Federal Reserve supervision. The GENIUS Act, enacted in 2023, had mandated that U.S. financial regulators and the Treasury Department implement corresponding regulations by July 2026. While that deadline has passed, agencies have shown notable advancement in recent months.
The Fed’s strategy also reflects the OCC’s stance regarding restrictions on stablecoin issuers offering interest or yield incentives to holders. According to the proposal, specific third-party arrangements may be interpreted as prohibited interest or yield payments. Although the rules remain pending finalization, regulators appear to be maintaining a restrictive interpretation of how cryptocurrency platforms can reward stablecoin users—similar to credit card loyalty programs.
The extent to which firms like Coinbase might incentivize stablecoin adoption was a major point of contention during discussions around the recently unsuccessful Digital Asset market structure legislation. With that bill’s failure, the GENIUS Act now serves as the primary legal authority governing stablecoin reward mechanisms.
Before these proposals become law, they must undergo review based on public feedback—a process typically spanning several months or more.
The first proposal addresses capital adequacy and liquidity requirements to ensure stablecoins remain fully backed by high-quality liquid assets while maintaining issuer resilience during periods of financial stress. It also specifies permissible stablecoin activities for institutions supervised by the Fed, including provisions related to reward structures.
The second proposal outlines the application process for federally regulated banks seeking authorization to issue their own stablecoins, requiring submission of business plans, financial statements, and internal policies.
«Stablecoins will only maintain stability if they can be reliably and promptly redeemed at face value across various market conditions,» remarked Fed Governor Michael Barr, formerly head of the Fed’s supervision division, in an official statement. «This includes times of economic turbulence, when even highly liquid Treasury securities may face valuation pressure, as well as situations involving distress at individual issuers or affiliated entities.»
In May, the U.S. Treasury Department released its own framework for executing the GENIUS Act, focusing on defining key terms associated with issuing dollar-backed stablecoins and identifying which entities fall under regulatory scope. Meanwhile, the Federal Deposit Insurance Corporation initiated its rulemaking process back in December, marking one of the earliest moves among federal bodies. Additionally, in June, several agencies jointly proposed enhanced identity verification requirements for stablecoin users, aligning them with existing protocols used by traditional financial institutions.
As stablecoins transition into mainstream finance, the Asia-Pacific region is emerging as a crucial testing ground. A recent analysis explores the evolving regulatory landscapes, practical applications, and the growing influence of RLUSD within the space.
Why it matters:
As stablecoins transition into mainstream finance, the Asia-Pacific region is emerging as a crucial testing ground. A recent analysis explores the evolving regulatory landscapes, practical applications, and the growing influence of RLUSD within the space.
