The Fed proposes how state member banks can set up stablecoin subsidiaries
Two Federal Reserve proposals under the GENIUS Act set out how an insured state member bank applies for a payment stablecoin subsidiary, with a 120-day decision clock and deemed approval, and how the Board would regulate those issuers. Comments are due 30 November 2026.
The GENIUS Act, the federal payment stablecoin law, "was enacted on July 18, 2025." On 29 September 2026 the Federal Reserve Board published two proposals that fill in its part of the law. One is a short procedural rule on applications. The other is a long rule, more than a hundred Federal Register pages, on how the Board would supervise the issuers it's responsible for.
Comments on both are due 30 November 2026.
The application rule
The first proposal (91 FR 61346) is about getting permission. Under it, "an insured State member bank must obtain the prior approval of the Board for a subsidiary to become a Board-supervised PPSI," a permitted payment stablecoin issuer.
The timeline comes from the Act and is tight by bank-application standards:
| Step | Deadline |
|---|---|
| Board tells the applicant whether the application is substantially complete | "not later than 30 days after receiving an application" |
| Board decides | "not later than 120 days after the submission date" |
| If the Board misses the 120 days on a complete application | The application "shall be deemed approved" |
| Applicant may ask for a hearing after a denial | Within 30 days of receiving notice of the denial |
The application must include "a business plan; financial information," along with written procedures and biographical reports, among other items. The Board may deny a substantially complete application only if it determines that the activities of the applicant, including the proposed subsidiary, "would be unsafe or unsound based on the factors in section 5(c) of the GENIUS Act."
The supervision rule
The second proposal (91 FR 61580) would amend 12 CFR parts 208, 211, 217, 225, 247 and 263. It covers "Board-supervised PPSIs," which include "subsidiaries of insured State member banks that have been approved by the Board to issue payment stablecoins," along with certain uninsured state-chartered depository institutions that move into the Board's framework.
The proposed new part 247 has sections on reserve assets (§ 247.11), redemption and fees (§ 247.12), BSA/AML and sanctions requirements (§ 247.13(d)) and minimum capital (§ 247.15). Payment stablecoins themselves "are not, however, a permitted reserve asset." The Board also proposes indexing certain thresholds to nominal GDP growth.
One piece reaches wider than the Fed's own issuers. The proposal implements "the prohibition on tying in section 4(a)(8) of the GENIUS Act, which is applicable generally to all PPSIs," in proposed §§ 247.40 and 247.41.
On timing, the proposal restates the Act's effective date: "the earlier of 18 months after the enactment date (July 18, 2025)" or 120 days after the primary federal regulators issue final implementing rules.
Who it reaches
The application rule is for insured state member banks only. Any bank or credit union that might partner with a stablecoin issuer, hold stablecoin reserves or offer a stablecoin product to customers has a reason to read the tying and reserve sections, even if it will never apply.
What it could mean
Very few community banks will apply for a stablecoin subsidiary in the next couple of years. We'd still read this one, because it shows how the Fed plans to treat the activity, and because the 120-day deemed approval is unusual. Most bank applications don't come with a clock that runs in the applicant's favor. A state member bank with a serious plan has real say over timing, provided it files something the Board will call substantially complete.
The more likely way a small bank meets this rule is as a counterparty. Stablecoin issuers will want bank accounts for reserves and operating funds, and fintech partners will want to offer stablecoins to your customers. Those conversations will land on your desk before any subsidiary application does. When they do, we'd want to know which regulator supervises the issuer, whether it is a permitted issuer under the Act, and how its BSA/AML and sanctions controls work, because your own program still applies to the account.
Our advice for now is modest: if your institution is a state member bank, flag the proposal for the board's strategy discussion and decide whether to comment. Everyone else can wait for the final rule, while keeping an eye on what your own regulator proposes.