The Federal Reserve's proposed rules for the stablecoin issuers it supervises give an under-reserved issuer as little as 24 hours to report the shortfall and less than 48 hours before forced liquidation begins. The proposal lets issuers keep minting during that window to avoid tipping off holders, a choice that puts the Fed's approach at odds with a rival plan from the Office of the Comptroller of the Currency.
An issuer supervised by the Federal Reserve whose reserves drop below the value of its outstanding tokens would have 24 hours to notify the Fed and submit a restoration plan. Unless the gap closes or the Fed allows the plan to proceed, the issuer must start liquidating reserves and redeeming tokens by 5 p.m. the next business day, a window the Fed says comes to less than 48 hours in many cases.
Minting continues during the rescue window
The 392-page proposal still lets the issuer mint new tokens while it works to close the hole. The Fed ties that choice to the public nature of blockchains: an abrupt halt in issuance would be visible on-chain and could tip holders off, speeding up the very run the rule aims to contain. Comments on the proposal are open for 60 days once it appears in the Federal Register.
Fed officials illustrate the arithmetic with a $100 million stablecoin backed by $95 million in reserves: once $35 million redeems at full par value, $60 million in reserve assets remains against $65 million in tokens, leaving about $0.92 of backing for everyone who holds on. Forced liquidation is designed to push all holders toward the same pro-rata loss before that hole widens further.
The OCC picked the opposite trade-off
The OCC proposed in March that issuers under its supervision must stop net new issuance immediately once reserves fall short, with mandatory liquidation only after 15 consecutive business days of shortfall. The Fed governs the issuers it supervises directly, while the OCC and state regulators oversee others under the GENIUS Act, so the two rules could run side by side.
Fed research on the March 2023 collapse of Silicon Valley Bank found that Circle disclosed $3.3 billion of USDC reserves, about 8% at the time, trapped at the failed bank. During that run, USDC fell as low as $0.86 on secondary markets.
Where the next run would travel
A CoinGecko survey found that 97.7% of stablecoin-denominated trading pairs on the 12 largest centralized exchanges use USDT or USDC. 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. Holders fleeing a distressed token could buy Bitcoin, exit into fiat, or shift into another stablecoin, and each path would show up differently across order books and funding rates.
Source: Federal Reserve
Trading involves risk.
Risk Disclaimer
