Fed stablecoin proposal sets 48-hour liquidation clock
The Federal Reserve's proposed rules for payment stablecoin issuers it supervises would give an issuer 24 hours to notify the Fed and submit a plan to restore full backing if its reserves fall below the value of its outstanding tokens. Unless it closes the gap or the Fed directs it to proceed with that plan, the issuer must begin liquidating reserves and redeeming tokens by 5pm on the next business day. The Fed says that window comes to less than 48 hours in many cases. The 392-page proposal would be open for comments for 60 days once it appears in the Federal Register.
The proposal requires reserve assets to equal or exceed outstanding tokens at all times, with issuers formally recording the fair value of those reserves at least once a day at 5pm in the time zone of their supervising Federal Reserve Bank. The Fed says issuers operating close to the line may need to run that calculation several times a day. During the rescue window, the proposal would let the issuer keep minting new tokens. 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 to the problem, speeding up the run the rules exist to contain. Once liquidation begins, minting stops and redemption fees are prohibited. A separate rule for ordinary conditions requires honouring redemption requests within two business days.
The Fed illustrates the risk with a $100 million stablecoin backed by $95 million in reserves. If $35 million redeems at full par value, $60 million in assets would remain against $65 million in tokens, leaving about $0.92 of backing for everyone who holds on. The Fed says forced liquidation is designed to push all holders toward the same pro-rata loss before faster redeemers can be rewarded at the expense of those behind them. The proposal asks commenters directly whether issuance should be capped or prohibited the moment the 1:1 threshold is breached.
The Office of the Comptroller of the Currency proposed a different trade-off in March. An issuer under its supervision that falls below minimum reserves would have to stop net new issuance immediately, with a narrow exception for moving existing tokens across ledgers. Mandatory liquidation would begin only if the shortfall persisted for 15 consecutive business days, a period the OCC could extend. The Fed's rules govern the issuers it supervises, while the OCC and state regulators oversee other issuers under the GENIUS Act.
The Fed's December 2025 research on the March 2023 collapse of Silicon Valley Bank documents how such runs behave. Circle disclosed that $3.3 billion of USDC reserves, about 8% at the time, were trapped at the failed bank; redemptions surged, the primary redemption channel largely shut over the weekend with banking rails offline, and USDC fell as low as $0.86 on secondary markets. CoinGecko's survey of the 12 largest centralised exchanges found that 97.7% of stablecoin-denominated trading pairs use USDT or USDC, and the total stablecoin market stood near $307.3 billion as of Sept. 25, with USDT at about $183.7 billion and USDC at $76.4 billion. The Fed acknowledges that a large enough Treasury position could be hard to sell in full without moving prices, and an IMF model from January describes the timing mismatch between round-the-clock stablecoin redemption and bond and repo markets that close overnight and on weekends. The 60-day comment period will weigh that visibility against the speed regulators want from a rescue.
