Fed stablecoin proposal would make circulation a capital cost for supervised issuers

A hypothetical payment stablecoin issuer within the Federal Reserve's proposed supervisory scope, with $1 billion in circulation and no revenue from activities outside its reserve assets, would start with a $20 million baseline operational-risk capital charge under the Fed's proposal announced Sept. 24. A separate loss-history adjustment and any other applicable capital charges would still have to be applied. The issuer would also need reserves backing its coins.

The proposal gives the growth of a stablecoin a direct capital consequence: more coins outstanding mean a larger baseline operating-risk charge, even if the issuer earns nothing from custody or other activities. The formula would apply to approved stablecoin-issuing subsidiaries of insured state member banks and to certain qualifying state-chartered issuers that transition to Fed supervision. The Office of the Comptroller of the Currency's pending proposal takes a different route for issuers under its jurisdiction, using a capital amount tailored to each business and a separate pool of liquid assets tied to expenses.

How the Fed's proposed charge grows

For the first $20 billion of payment stablecoins outstanding, the Fed would calculate the issuance portion of baseline operational-risk capital at 2%. The rate would fall to 1.5% on the next $30 billion and 1% on the amount above $50 billion. These are marginal bands: crossing a threshold would change the rate only on the additional issuance. The Board's memo also adds 25% of the issuer's three-year average annual revenue from non-reserve assets to the baseline.

At $10 billion outstanding with no non-reserve revenue, the baseline issuance portion would be $200 million. This second hypothetical remains entirely in the first band. Both calculations are hypothetical.

The Fed also proposes a loss scalar that can move the operational-risk charge up or down in response to realized losses. An individual issuer's operating-risk charge would also reflect the loss adjustment; its total capital requirement could include other components.

Capital and stablecoin reserves serve different purposes. The Fed would require covered issuers to keep eligible reserve assets with a fair value at least equal to the par value of their outstanding coins. It separately proposes a 2% capital charge on reserve assets that are uninsured deposit claims or undercollateralized reverse repurchase agreements. Those possible credit-risk charges sit apart from the operational-risk calculation. One-to-one reserve assets are a separate requirement from the $20 million baseline capital figure.

The Board memo limits the second category to state-qualified issuers that are uninsured state-chartered depository institutions with at least $10 billion in payment stablecoins outstanding and that transition under the GENIUS Act. The $10 billion threshold applies only to that transition category.

That scope is narrower than the market for dollar stablecoins as a whole. Supervision depends on the legal issuer's status and regulator. The $1 billion example assumes an issuer that qualifies for Board supervision, with no company-specific inputs.

The Fed announced the proposal on Sept. 24 alongside a separate proposal for how insured state member banks would apply to issue payment stablecoins through subsidiaries. The capital formula belongs to the proposed regulatory framework for Board-supervised issuers. Both proposals are open to revision through rulemaking.

The OCC's different proposed method

The OCC's March proposal would set an initial minimum capital amount for a newly chartered or licensed issuer based on its own business plan and risks, subject generally to a $5 million floor during a de novo period. It would also require ongoing capital commensurate with the issuer's business model and risk profile. The proposed rule text leaves that capital amount to a supervisory assessment.

The OCC would require a separate operational backstop: readily available liquid assets equal to 12 months of total expenses, identified apart from the assets backing stablecoins. The backstop would support operations during a disruption. It is a liquidity requirement measured by expenses. The Fed's operating-risk capital charge uses issuance and non-reserve revenue as its starting point.

The OCC did discuss a variable capital component based on coins outstanding as an alternative and sought comment on it. Its proposed rule text omits that percentage-based charge. The two methods apply across different supervisory jurisdictions. Each regulator's eventual total requirement remains undetermined.

The OCC proposal was published in the Federal Register on March 2, and its comment period closed May 1. For the Fed proposals, the Board says comments will close 60 days after Federal Register publication; its Sept. 24 release gives no calendar deadline. The next consequential details are the final calibration of the Fed's loss adjustment and how each regulator settles its capital and liquidity rules after comments.