The Federal Reserve has proposed rules for the payment stablecoin issuers it supervises that would give an issuer 24 hours to notify the Fed and submit a plan to restore full backing once its reserves fall below the value of its outstanding tokens, with liquidation required to begin by 5 p.m. on the next business day if the gap is not closed. The Fed says that window comes to less than 48 hours in many cases, and comments are open for 60 days once the 392-page proposal appears in the Federal Register.
Fed proposes 24-hour clock for stablecoin issuers whose reserves fall short
The Federal Reserve has proposed rules for the payment stablecoin issuers it supervises that would give an issuer 24 hours to notify the Fed and submit a plan to restore full backing once its reserves fall below the value of its outstanding tokens, with liquidation required to begin by 5 p.m. on the next business day if the gap is not closed. The Fed says that window comes to less than 48 hours in many cases, and comments are open for 60 days once the 392-page proposal appears in the Federal Register.
The proposal requires reserve assets to equal or exceed outstanding tokens at all times. Issuers would have to record the fair value of those reserves at least once a day at 5 p.m. in the time zone of their supervising Federal Reserve Bank, and the Fed says issuers operating close to the line may need to run that calculation several times a day. The breach clock starts at the beginning of liquidation, a process the Fed says can take longer to finish; once liquidation begins, minting stops and redemption fees are prohibited. A separate rule for ordinary conditions requires honoring redemption requests within two business days, a timeline that runs independently of the breach clock.
The proposal would let an issuer keep minting new tokens during the rescue window. The Fed ties that choice to the public nature of blockchains, saying an abrupt halt in issuance would be visible on-chain and could tip holders off to the problem, speeding up the run the rules exist to contain.
The Fed illustrates the arithmetic with a $100 million stablecoin backed by $95 million in reserves. Split evenly, every holder could recover $0.95 per token; once $35 million redeems at full par value, $60 million in assets remains against $65 million in tokens, leaving about $0.92 of backing for everyone who holds on. The same example shows $10 million in par redemptions leaving $0.94 per token, $50 million leaving $0.90 and $80 million leaving $0.75. The Fed says a fixed reserve hole grows larger per remaining token with every holder who exits at $1, rewarding the fastest redeemers at the expense of everyone behind them, and that forced liquidation is designed to push all holders toward the same pro-rata loss before that happens.
Each fully funded new token spreads the existing hole across a larger supply, leaving its dollar size at $5 million in the Fed's example. Twenty million dollars of fresh issuance alongside the $35 million in redemptions would lift coverage to roughly $0.94, with the new buyers absorbing part of a loss that existed before they arrived, according to the example. Closing the hole itself requires new capital, recovery of an impaired asset or a rebound in reserve values, and genuine distress can leave few buyers willing to mint. The proposal asks commenters directly whether issuance should be capped or prohibited the moment the 1:1 threshold is breached.
Circle's figures show how much routine issuance activity a large stablecoin generates. As of Sept. 21, USDC had $74.6 billion in circulation against $74.8 billion in reserves. Over the prior 30 days, Circle issued $40.2 billion and redeemed $39 billion, a gross flow of $79.2 billion that exceeds the token's entire supply even though net circulation grew by only $1.2 billion.
The Fed's December 2025 research on the March 2023 collapse of Silicon Valley Bank documents how these runs behave. Circle disclosed that $3.3 billion of USDC reserves, about 8% at the time, were trapped at the failed bank. Redemptions surged, the primary redemption channel largely shut over the weekend with banking rails offline, and USDC fell as low as $0.86 on secondary markets, where trading volume hit nearly $2 billion in a single hour on March 11. The researchers concluded that shutting an issuer's redemption window leaves holders free to keep selling on exchanges, so the run moves venues and keeps going.
CoinGecko's survey of the 12 largest centralized exchanges found that 97.7% of stablecoin-denominated trading pairs use USDT or USDC, and most spot volume on those venues trades against stablecoins. The total stablecoin market stands near $307.3 billion, with USDT at about $183.7 billion and USDC at $76.4 billion as of Sept. 25.
The GENIUS Act steers reserves toward Treasuries maturing within 93 days and qualifying repo arrangements, and the Fed acknowledges that a large enough Treasury position could be hard to sell in full without moving prices. An IMF model from January lays out the timing mismatch between stablecoin holders, who can redeem around the clock, and bond and repo markets, which close overnight and on weekends; a large redemption wave can drain cash buffers and force bond sales as soon as those markets reopen.
- The source does not state the date the proposal was issued or the date it will appear in the Federal Register.
- The source does not state which issuers the Federal Reserve supervises, how many there are, or whether the proposed rules would apply to Circle.
- The source does not state Circle's response to the proposal.
- The source does not specify the year of the OCC's March proposal, nor the years for the Sept. 21 and Sept. 25 figures it cites.
- The source does not state whether the IMF model or the CoinGecko findings were submitted as comments on the proposal or otherwise taken into account in drafting it.
- The source does not state what would happen if an issuer misses the 24-hour notification or 5 p.m. liquidation deadlines, nor what penalties the proposal provides.
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