The U.S. Federal Reserve has proposed two sets of rules aimed at putting the GENIUS Act into effect, including provisions covering stablecoin rewards and yield programs.
The proposals, released Thursday, represent the Fed’s portion of a broader federal regulatory effort to establish oversight for stablecoin issuers under the Guiding and Establishing National Innovation for U.S. Stablecoins Act.
Both proposals will undergo 60-day public comment periods. They would establish regulatory protections for stablecoin users while creating a process through which Fed-supervised banks could receive approval to issue stablecoins.
The GENIUS Act instructed federal banking regulators and the Treasury Department to establish implementing regulations by July 2026. The agencies have missed that deadline, although work on the framework has advanced significantly in recent months.
The Fed’s proposed treatment of stablecoin rewards is similar to rules separately proposed by the Office of the Comptroller of the Currency. Both approaches address the GENIUS Act’s prohibition on stablecoin issuers paying interest or yield to holders.
Under the Fed’s proposal, certain arrangements involving third parties would be presumed to represent prohibited interest or yield payments. The central bank said its interpretation is consistent with the OCC’s approach.
The rules are not final, but the framework could allow a limited range of stablecoin incentives that resemble rewards offered through conventional credit-card programs.
Stablecoin rewards were among the issues debated during negotiations over the Digital Asset Market Clarity Act. The legislation included proposals that could have affected how companies such as Coinbase rewarded stablecoin users, but those changes did not advance. The GENIUS Act therefore remains the primary federal statute governing such rewards.
The proposals will be revised after regulators review public comments before being issued in final form. The process generally takes several months, although complex regulations can require substantially more time.
Fed Sets Reserve Rules and Bank Issuance Process
The first proposal establishes capital and reserve standards designed to ensure stablecoins are backed by highly liquid assets and issuers have adequate financial resources during periods of stress. It also identifies permitted stablecoin activities for banks supervised by the Fed and contains the provisions addressing rewards.
The second proposal lays out the approval process for Fed-regulated banks seeking to issue stablecoins. Banks would need to submit a business plan, financial information, relevant policies and procedures, along with other supporting materials.
Fed Governor Michael Barr said the stability of a stablecoin depends on users being able to redeem it at par quickly and reliably under different market conditions. He said this is particularly important during periods of market stress, when even liquid government securities may face pressure or when an issuer and related entities encounter financial difficulties.
The Treasury Department proposed its own GENIUS Act implementation framework last month, including definitions for U.S. stablecoin issuance and the entities subject to the legislation.
The Federal Deposit Insurance Corp. began working on its part of the regulatory framework in December. In June, several federal agencies also proposed customer-identification requirements for stablecoin issuers similar to those followed by other regulated financial institutions.
