Fed proposes 48-hour liquidation rule for payment stablecoin issuers

September 26, 2026 at 10:55 PM3 min

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The Federal Reserve proposed rules requiring payment stablecoin issuers to restore full reserve backing within 24 hours or begin liquidation by 5 p.m. the next business day. The proposal, spanning 392 pages, aims to prevent runs by forcing pro-rata losses before par redemptions drain reserves. Comments are open for 60 days once the proposal appears in the Federal Register.

Key Facts

The Federal Reserve's proposed rules give an issuer 24 hours to notify the Fed and submit a plan to restore full backing once reserves fall below outstanding tokens.
Unless the gap is closed or the Fed directs otherwise, the issuer must begin liquidating reserves and redeeming tokens by 5 p.m. on the next business day.
The proposal allows issuers to keep minting new tokens during the rescue window to avoid signaling distress on public blockchains.
Circle's USDC had $74.6 billion in circulation against $74.8 billion in reserves as of Sept. 21, with $40.2 billion issued and $39 billion redeemed over the prior 30 days.
Comments on the proposal are open for 60 days once it appears in the Federal Register.

The Liquidation Clock

The Federal Reserve's proposal sets a crisis clock measured in hours for payment stablecoin issuers it supervises. An issuer whose reserves fall below the value of its outstanding tokens has 24 hours to notify the Fed and submit a plan to restore full backing. Unless the issuer closes the gap or the Fed directs it to proceed with that plan, the issuer must 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. 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 5 p.m. in the time zone of their supervising Federal Reserve Bank.

Minting During the Rescue Window

The proposal lets the issuer keep minting new tokens during the rescue window, a choice the Fed ties 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 very run the rules exist to contain. Once liquidation begins, minting stops and redemption fees are prohibited. A separate rule for ordinary conditions requires honoring redemption requests within two business days, a timeline that runs independently of the breach clock.

The Arithmetic of Runs

The Fed illustrates the logic with a $100 million stablecoin backed by $95 million in reserves. Split evenly, every holder could recover $0.95 per token. Once $35 million redeems at full par value, $60 million in assets remains against $65 million in tokens, leaving about $0.92 of backing for everyone who holds on. Extending the same arithmetic, $50 million in par redemptions would leave $0.90 per token, and $80 million would leave $0.75. A fixed reserve hole grows larger per remaining token with every holder who exits at $1, which rewards the fastest redeemers at the expense of everyone behind them.