Board of Governors of the Federal Reserve System

As I have noted previously, the regulatory framework for stablecoins needs to provide strong guardrails and consumer protections so that new instruments can foster payments improvements that benefit households and businesses. Stablecoins will only be stable if they can be reliably and promptly redeemed at par in a range of conditions. This includes during market stress, when pressure can be put on the value of even otherwise liquid government debt, and during episodes of strain on the individual issuer or its related entities. I support the proposed rulemaking as a step in that direction within the framework provided by the GENIUS Act, particularly as the rulemaking identifies key questions on which public feedback will be important.

I am encouraged by provisions for reserve asset limitations, as well as transparent and standardized capital requirements. It will be useful to have public input on both of these aspects of the proposal, and in particular on whether the rule adequately addresses interest rate and foreign currency risks. In addition, it will be important that universal redemption rights are clear in the final rule to support public confidence in access to their funds.

In July, the Board requested comment on a proposal for bank anti-money laundering programs. In any final rulemaking for today's stablecoin proposal, I will want to see addressed the standard that would prevent the Board from undertaking a supervisory or enforcement action related to an anti-money laundering deficiency unless the issue identified is a "significant or systemic" issue. As is the case on the Board's July proposal, I am concerned that the "significant or systemic" standard may have unknown effects on the Board's ability to effectively substantiate that an institution establishes and maintains compliant programs.

While the Board's proposal is an important step in GENIUS Act implementation, further work will undoubtedly be required if stablecoins are to be reliable payment instruments.