Fed Proposes GENIUS Act Reserve and Capital Rules for Stablecoin Issuers

The Federal Reserve has put forward a package of proposed rules that would set binding reserve-asset limits, standardised capital requirements, and a dedicated application process for payment stablecoin issuers operating under its supervision. Announced on 24 September 2026, the proposals are the central bank's latest step in implementing the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act signed into law by President Trump. For accounting firms, auditors, and CFOs advising clients who issue or hold stablecoins, the proposals carry direct implications for stablecoin accounting under US GAAP, reserve-portfolio classification, and anti-money laundering programme standards.

What the GENIUS Act Already Requires

Before examining the Fed's specific proposals, it helps to understand the statutory baseline the central bank is working from. The GENIUS Act established the first comprehensive federal licensing framework for payment stablecoins in the United States. At its core, the law requires that stablecoins be fully backed by US dollars or assets of equivalent liquidity, and that issuers submit to mandatory annual audits. Those two requirements, full backing and auditor scrutiny, are the legislative anchors around which the Fed is now building its implementing regulations.

Who Falls Under Federal Reserve Jurisdiction

Not every stablecoin issuer will be supervised by the Fed. The GENIUS Act creates a tiered licensing structure in which state-chartered issuers may remain under state supervision up to certain thresholds, while larger issuers and bank-affiliated entities typically fall under federal oversight. The Fed's current proposals apply specifically to board-supervised institutions, meaning banks and their holding companies that the Federal Reserve already regulates. That scope is important: firms advising national bank clients or bank holding companies with stablecoin ambitions need to track this proposal closely, while firms serving smaller state-licensed issuers should watch the parallel workstreams at the OCC and state banking departments.

The Three Core Proposals

The Fed's package has three distinct but interconnected pillars. Each one has accounting or compliance consequences that practitioners need to map to client engagements.

Full Backing with High-Quality Liquid Assets

The first and most structurally significant proposal requires that payment stablecoin issuers back their outstanding tokens one-for-one with short-term Treasury bills or other highly liquid assets. The GENIUS Act already mandates full backing in principle; the Fed's proposal operationalises that mandate by specifying the quality of assets that count as eligible reserves.

From a US GAAP accounting perspective, this matters immediately. Short-term Treasury bills held as reserve assets will generally be classified as debt securities under ASC 320. The classification election, whether held-to-maturity, available-for-sale, or trading, determines whether unrealised gains and losses flow through other comprehensive income or directly through the income statement. If a client's reserve portfolio includes instruments that do not meet the proposed eligibility criteria, a reclassification or disposal event could trigger gain or loss recognition at the point of compliance.

For firms preparing or auditing financial statements under IFRS, the parallel question is whether reserve assets qualify as cash equivalents under IAS 7 or must be presented as separate financial assets under IFRS 9. The GENIUS Act's liquidity standard may not map cleanly to IFRS 9 categories, so each reserve instrument needs individual assessment. Our earlier analysis of MFSA FinTech2030 stablecoin and DeFi accounting takeaways covers comparable reserve-quality debates arising under MiCA, which offers useful comparative context.

Standardised Capital Requirements

The second pillar introduces standardised capital requirements calibrated to the risks associated with stablecoin issuance. The Fed has not yet published the precise ratios, but the framework is designed to ensure that board-supervised issuers can absorb losses without impairing the one-for-one peg.

For bank holding companies already subject to Basel III capital rules, this adds a stablecoin-specific capital charge on top of existing requirements. Accounting teams will need to model the impact on regulatory capital ratios and assess whether any planned dividend policies or share-buyback programmes remain viable under the new constraints. For non-bank entities seeking to issue stablecoins through a bank subsidiary, the capital requirements effectively set a minimum balance-sheet size for the venture to be viable.

The capital rules also interact with FASB's fair-value measurement guidance under ASC 820 and, more specifically, with ASC 350-60, which governs the recognition and measurement of crypto assets held by entities. Where a stablecoin issuer holds reserve assets that fluctuate in fair value, those movements may affect retained earnings and, in turn, the capital adequacy calculation. Practitioners should model that sensitivity before the final rule is published.

A Dedicated Application Process for Bank-Affiliated Issuers

The third pillar creates a specific application pathway for board-supervised banks that want to issue payment stablecoins. This is procedurally significant: rather than relying on existing charter applications or no-action processes, banks would follow a bespoke route that the Fed can use to assess reserve quality, capital adequacy, and AML programme strength before issuance begins.

From an advisory standpoint, accounting firms and CFOs should expect the application process to require detailed prospective financial statements, reserve-management policies, and documentation of how the issuer will account for tokens in circulation. The latter is a nuanced area: stablecoins issued by a bank represent a liability of the issuer, and the corresponding reserve assets represent the offsetting portfolio. How that liability is presented on the balance sheet, whether as deposits, other borrowed funds, or a new category, will likely need regulatory guidance or a specific accounting policy choice documented in the application.

Governor Barr's AML Dissent and What It Signals

Federal Reserve Governor Michael Barr voted to support the proposal but entered a pointed reservation about the AML provisions. Specifically, Barr expressed concern about a standard, also referenced in the Fed's July 2026 proposal, that would restrict the Board from taking supervisory or enforcement action related to an AML deficiency unless the issue rises to the level of being "significant or systemic."

Why the Threshold Question Matters for Compliance Teams

Barr's concern is substantive. A "significant or systemic" trigger for AML enforcement action is meaningfully higher than the "unsafe or unsound practice" standard that regulators typically apply to bank compliance failures. If that threshold survives into the final rule, it could create a gap in which stablecoin issuers with moderate but chronic AML weaknesses face limited supervisory pressure.

For compliance officers and the accounting firms that support AML programme audits, this ambiguity cuts both ways. On one hand, a high enforcement threshold might reduce the immediate regulatory risk of minor programme gaps. On the other hand, if the threshold later shifts back toward a standard standard, institutions that allowed AML controls to atrophy under the "significant or systemic" regime could face significant remediation costs. The prudent approach is to maintain AML programmes to the existing bank standard regardless of what the final GENIUS Act rule prescribes.

Barr's willingness to flag this concern publicly is also a signal that the comment period, which will follow formal publication of the proposal in the Federal Register, may generate significant industry input on the AML question. Accounting and compliance advisers should consider submitting or supporting comment letters that clarify how AML deficiency standards interact with audit and attestation work.

Accounting Implications: US GAAP and IFRS Side by Side

The proposals land at a moment when standard-setters on both sides of the Atlantic are still refining their guidance on digital asset accounting. FASB's ASC 350-60, which took effect for fiscal years beginning after 15 December 2024, requires entities to measure certain crypto assets at fair value with changes recognised in net income. However, ASC 350-60 currently applies to assets the holder does not itself issue; the accounting treatment of stablecoins on the issuer's balance sheet, specifically the liability side, remains less settled.

Reserve Asset Classification Under US GAAP

If the Fed's proposal is finalised as drafted, the reserve portfolio of a GENIUS Act-compliant issuer will consist primarily of short-term Treasury bills. Under ASC 320, those instruments are debt securities. The classification election carries income-statement consequences: a trading classification means mark-to-market movements hit net income each period, while an available-for-sale classification parks unrealised changes in other comprehensive income until realisation or impairment. Given that reserve assets are held to support a fixed-value liability, an available-for-sale or held-to-maturity designation may be more representative of the economic relationship, but practitioners need to document the intent and ability to hold at inception.

IFRS Treatment and the Crypto Assets Standard

For entities reporting under IFRS, the IASB's narrow-scope amendments to IAS 38 and IAS 7, clarifying that crypto assets are not intangibles in all cases, provide some guidance, but the specific treatment of stablecoin reserve portfolios still requires judgement. Treasury bills held as reserves would likely qualify as financial assets under IFRS 9, measured at amortised cost if the business model test is met, or at fair value through other comprehensive income. The key question is whether the reserve portfolio is managed on a hold-to-collect basis, consistent with amortised cost, or on a hold-to-collect-and-sell basis. Firms advising IFRS reporters should document that assessment now rather than waiting for the final rule.

For broader context on how reserve-quality debates are playing out under European regulation, the stablecoin accounting implications of the GENIUS Act legislative background and our crypto compliance and reporting pillar provide additional reference points.

Practical Next Steps for Accounting Firms and CFOs

The proposals are not yet final. A comment period will open once the notice of proposed rulemaking is published in the Federal Register, and the final rule could differ materially from what the Fed has outlined. That said, waiting for finality before beginning the accounting and compliance analysis is a mistake. Here are the immediate actions practitioners should be taking.

Map Reserve Portfolios Against the Eligibility Criteria

Any client that currently issues or plans to issue a payment stablecoin under the GENIUS Act framework should map its existing or planned reserve portfolio against the Fed's proposed eligibility list. Assets that do not qualify will need to be replaced, and the disposal of ineligible assets may generate taxable gains or losses that require planning now.

Model Capital Adequacy Under the New Requirements

Until the precise capital ratios are published, firms can stress-test client balance sheets against a range of plausible requirements. That modelling should feed into capital planning documents and, for publicly traded clients, into forward-looking disclosures in quarterly filings.

Review AML Programme Documentation

Regardless of how the "significant or systemic" threshold is resolved in the final rule, Governor Barr's dissent signals that AML will be a focal point of regulatory scrutiny throughout the implementation period. Compliance teams should conduct a gap analysis of their stablecoin-related transaction monitoring, customer due diligence, and suspicious activity reporting procedures against the Bank Secrecy Act standard, not against a potentially lower GENIUS Act standard.

Prepare for the Application Process

Bank-affiliated clients considering stablecoin issuance should begin assembling the documentation likely required in the new application process: draft reserve-management policies, prospective financial statements, accounting policy memos on liability classification, and AML programme descriptions. Starting that work before the application guidance is finalised allows for iteration rather than a last-minute scramble.

Frequently Asked Questions

Does the Fed's proposal affect stablecoin issuers that are not banks?

The current proposals apply to board-supervised institutions, meaning entities already regulated by the Federal Reserve, such as bank holding companies and state member banks. Non-bank issuers and those under OCC or state supervision will be subject to separate rulemakings. Practitioners should monitor those parallel workstreams alongside the Fed's proposals.

How should a stablecoin issuer account for tokens in circulation under US GAAP?

Stablecoins issued by a bank represent a liability of the issuer, broadly analogous to a deposit obligation. The precise balance-sheet presentation, whether as deposits, other liabilities, or a new category, is still evolving and may be clarified in the Fed's application guidance. Issuers should document their accounting policy choice and seek pre-clearance from their auditors ahead of any formal application.

What is the FASB ASC 350-60 interaction with reserve assets held by a stablecoin issuer?

ASC 350-60 applies to crypto assets held by an entity that did not issue them. A stablecoin issuer's reserve portfolio, which typically consists of Treasury bills and other traditional financial instruments rather than crypto assets, would fall under ASC 320 for debt securities, not ASC 350-60. The fair-value requirements of ASC 350-60 are more directly relevant to issuers that hold crypto assets as part of their own treasury or investment portfolio.

How does Governor Barr's AML concern affect audit and attestation engagements?

Barr's concern relates to the enforcement threshold that regulators can use to act on AML deficiencies, not to the substantive requirements of the Bank Secrecy Act. Auditors and attestation practitioners should continue to assess AML programmes against the full BSA standard. A higher enforcement threshold in the final rule does not change the underlying legal obligation of the issuer to maintain a compliant programme.

When will the final rule be published?

The Federal Reserve has not announced a specific timeline for finalisation. Once the notice of proposed rulemaking appears in the Federal Register, a public comment period will follow before the Board reviews submissions and publishes a final rule. Firms should monitor the Federal Register and the Fed's Board announcements for updates, and consider submitting comment letters on issues such as reserve-asset eligibility and the AML threshold.

Source: The Block