The Federal Reserve has proposed a resolution timetable for payment stablecoin issuers that runs by the hour. Issuers would have 24 hours after discovering that reserves have fallen below the value of tokens in circulation to notify the Fed and submit a plan to restore full coverage. If the shortfall is not repaired and the Fed has not instructed the issuer to continue its remediation plan, the issuer would have to begin liquidating reserves and processing redemptions by 5 p.m. on the next business day after the plan period ends. Depending on the circumstances, the Fed said the issuer could have less than 48 hours to act.
The 392-page proposal would allow issuers to mint new tokens during the remediation window. The Fed said blockchain issuance is publicly visible, so an abrupt halt could be interpreted by holders as a sign of trouble and accelerate redemptions and selling. The proposal will open for a 60-day comment period after publication in the Federal Register. The regulator is also asking whether issuance should be restricted or prohibited as soon as reserves fall below the one-to-one threshold.
A 24-hour reporting clock after a reserve shortfall
The proposal would require issuers to maintain reserve assets worth at least the value of all tokens in circulation at all times. Issuers would also have to record the fair value of their reserves at least once a day, at 5 p.m. in the time zone where their supervising Federal Reserve Bank is located. The Fed noted that issuers operating close to the minimum reserve requirement may need to calculate their position several times a day to identify a shortfall promptly.
Once liquidation begins, an issuer must stop minting new tokens and may not charge redemption fees. Completing the liquidation could take longer than the required deadline for starting it. A separate rule covering normal operations would require issuers to process redemption requests within two business days; that clock would run independently from the post-shortfall resolution timetable.
The Fed used a hypothetical example to show how early redemptions can change the reserve coverage available to remaining holders. If a stablecoin has $100 million in circulation and $95 million in reserves, each token is backed by an average of $0.95. If holders redeem $35 million of tokens at par, the issuer would be left with $60 million in reserves against $65 million of tokens still in circulation. Coverage for each remaining token would fall to about $0.92.
| Pre-liquidation redemptions at par | Remaining reserves | Remaining tokens | Reserves per remaining token |
|---|---|---|---|
| $0 | $95 million | $100 million | $0.95 |
| $10 million | $85 million | $90 million | About $0.94 |
| $35 million | $60 million | $65 million | About $0.92 |
| $50 million | $45 million | $50 million | $0.90 |
| $80 million | $15 million | $20 million | $0.75 |
In the same example, the more tokens redeemed at par, the lower the reserve coverage for holders who remain. Coverage falls to about $0.90 after $50 million of redemptions and to $0.75 after $80 million. The fixed reserve shortfall is then spread across fewer remaining tokens, meaning holders who exit at par may fare better than those who continue to hold. The forced-liquidation framework is intended to distribute losses proportionally rather than leave later redeemers carrying an increasingly large shortfall.
Temporary issuance could avoid a sudden-stop signal
Public data from Circle illustrates the scale of daily issuance and redemptions at a large stablecoin issuer. As of September 21, USDC in circulation stood at $74.6 billion, while reserves totaled $74.8 billion. During the previous 30 days, Circle issued $40.2 billion and redeemed $39 billion, for combined flows of $79.2 billion—more than the entire USDC supply. Net circulation increased by only $1.2 billion over the period.
In a market with that level of turnover, a sudden halt in on-chain minting could attract immediate attention. The Fed proposal would therefore allow issuance to continue during remediation. New tokens would still need to be fully backed. In the example above, if $35 million were redeemed while $20 million of new tokens were issued, the absolute reserve shortfall would remain $5 million. But because more tokens would share that shortfall, coverage could recover to about $0.94 per token. Buyers of the new tokens would consequently share losses that already existed before their purchase.
Issuance alone would not eliminate the gap. Restoring full coverage would still require the issuer to add new capital, recover impaired assets or wait for the value of reserve assets to rise. If confidence in the issuer has already weakened, there may be few buyers willing to subscribe to new tokens. The proposal specifically asks whether issuance should be restricted immediately once reserves fall below one-to-one coverage.
OCC proposal would halt net issuance first
A proposal issued by the Office of the Comptroller of the Currency in March takes a different approach. An issuer under OCC supervision would have to stop net new issuance immediately after falling below the minimum reserve requirement. It could still transfer existing tokens to another ledger, provided the total number of tokens outstanding did not increase. Mandatory liquidation would be triggered only if the reserve shortfall persisted for 15 consecutive business days, although the OCC could extend that period.
The two frameworks would apply to different groups of issuers. The Fed would oversee issuers within its supervisory perimeter, while the OCC and state regulators would oversee other issuers under the GENIUS Act. As a result, the two resolution paths could operate at the same time.
| Treatment after reserves fall below the minimum | Fed proposal | OCC proposal |
|---|---|---|
| New issuance | Temporarily permitted during remediation | Net new issuance stopped immediately |
| Initial response | Notify the Fed and submit a remediation plan within 24 hours | No net increase while reserves are restored |
| Start of liquidation | By 5 p.m. on the next business day after the plan period, unless the shortfall is repaired or the Fed directs otherwise | After 15 consecutive business days of insufficient reserves |
| Regulatory flexibility | The Fed may direct the issuer to continue its remediation plan | The OCC may extend the 15-business-day period |
2023 USDC depeg highlighted the role of banking hours
A Federal Reserve study published in December 2025 reviewed the stablecoin run during the 2023 collapse of Silicon Valley Bank. Circle disclosed at the time that $3.3 billion of USDC reserves were trapped at the bank, representing about 8% of its reserves. Redemption demand surged, but the main redemption channel was largely unavailable while banking access was closed over the weekend. USDC fell as low as $0.86 in secondary-market trading, and one-hour trading volume on March 11 approached $2 billion.
The researchers noted that closing an issuer's redemption window does not necessarily stop holders from selling. Trading can continue on crypto exchanges. The Fed's proposal therefore considers on-chain redemptions, secondary-market trading and issuer liquidation as part of the same resolution process. Redemption activity can trigger additional redemptions, while secondary markets may absorb some selling and reduce the pressure to redeem directly with the issuer at par, which would force the issuer to sell reserve assets.
Redemption pressure could reach bond markets
As of September 25, the stablecoin market totaled about $307.3 billion. USDT accounted for approximately $183.7 billion and USDC for about $76.4 billion. Holders exiting a troubled token may move into another stablecoin, fiat currency or bitcoin. Bitcoin prices across different stablecoin pairs, together with order-book depth and funding rates, can help track those flows. If bitcoin trades at a higher price when quoted in a stressed stablecoin than when quoted in U.S. dollars, the difference may reflect a discount in that stablecoin rather than a change in bitcoin's underlying price.
The GENIUS Act requires reserves to be invested primarily in U.S. Treasuries with maturities of no more than 93 days and in eligible repurchase arrangements. The Fed has also acknowledged that a sufficiently large Treasury position could affect market prices if an issuer had to sell concentrated holdings. A model published by the International Monetary Fund in January examined the mismatch between stablecoin holders' ability to redeem around the clock and the fact that bond and repo markets are closed overnight and on weekends. Large redemptions could first consume cash buffers and then force issuers to sell bonds once markets reopen.
Direct redemptions for dollars would initially draw down an issuer's reserves, making redemption volumes and reserve coverage key measures. Switching into other stablecoins could alter spreads and liquidity across exchanges and decentralized trading platforms. Buying bitcoin could produce price differences between trading pairs denominated in different stablecoins. Even if banking channels are closed, holders may continue selling in secondary markets. When issuers eventually sell Treasuries or repo assets after markets reopen, the pressure could spread to traditional short-term funding markets.
If an issuer can close the gap within the initial 24-hour window, market disruption may end relatively quickly, allowing issuance and redemptions to return to normal. If a shortfall emerges late on a Friday, however, redemptions and secondary-market discounts could interact before the next business day, while the issuer may have to wait until markets open on Monday to sell Treasuries. The 60-day comment period will focus on how to prevent a visible halt in blockchain issuance from becoming a run signal and how to give issuers enough time to respond once reserves fall short.