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Fed proposal for payment stablecoins adds a sub-48 hour liquidation clock

The rules would require a stablecoin issuer with reserves below token value to submit a recovery plan within 24 hours, then begin liquidating reserves and redeeming by 5 p.m. the next business day unless the Fed authorizes the plan.

Reported · Written up by our desk · Regulation

The Federal Reserve has proposed new rules for payment stablecoin issuers it supervises that rely on a crisis clock measured in hours, according to CryptoSlate.

Under the proposal, an issuer whose reserves fall below the value of its outstanding tokens would have 24 hours to notify the Fed and submit a plan to restore full backing.

If the issuer does not close the shortfall or receive Fed direction to proceed with its plan, it would have to begin liquidating reserves and redeeming tokens by 5 p.m. on the next business day.

The Fed says that window comes to less than 48 hours in many cases, while the proposal would also require issuers to keep reserve assets equal to or greater than outstanding tokens at all times and record the fair value of those reserves at least once daily at 5 p.m. in the time zone of their supervising Federal Reserve Bank.

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