Fed proposes tiered capital charges on stablecoin issuers
In brief
- Fed's tiered capital charges: 2% on first $20B outstanding, 1.5% on next $30B, 1% above $50B
- A $1B stablecoin with no non-reserve revenue faces $20M baseline operational-risk capital charges
- Proposal applies to stablecoin subsidiaries of insured state member banks and qualifying state-chartered issuers
- Fed requires reserve assets equal to par value and imposes 2% charge on uninsured deposits or undercollateralized repos
How the tiered structure works
The Fed's proposal applies a tiered capital charge formula: 2% on the first $20 billion of stablecoins outstanding, 1.5% on the next $30 billion, and 1% on amounts above $50 billion. This means larger issuers benefit from declining marginal rates, but every dollar of circulation triggers a capital cost.
A hypothetical stablecoin issuer with $1 billion in circulation and no non-reserve revenue would face a $20 million baseline operational-risk capital charge. Scale that to $10 billion outstanding, and the baseline issuance portion reaches $200 million. The structure penalizes growth in raw stablecoin supply regardless of whether the issuer generates revenue from reserve assets.
The proposal would apply to approved stablecoin-issuing subsidiaries of insured state member banks and certain qualifying state-chartered issuers that transition to Fed supervision.
Revenue and reserve requirements
The Fed proposes adding 25% of an issuer's three-year average annual revenue from non-reserve assets to the baseline operational-risk capital calculation. This creates a secondary lever: issuers with meaningful non-reserve revenue (yield from lending, trading fees, or other services) can offset some of the circulation-based charge.
The Fed would require covered stablecoin issuers to maintain eligible reserve assets with fair value at least equal to the par value of outstanding coins. Separately, the Fed proposes a 2% capital charge on reserve assets that are uninsured deposit claims or undercollateralized reverse repurchase agreements. This targets risk concentration in reserve pools.
The proposal also includes a loss scalar that can adjust the operational-risk charge up or down in response to realized losses, introducing a dynamic element tied to actual issuer performance.
OCC's divergent approach
The OCC's March proposal takes a different route for issuers under its jurisdiction. It would set an initial minimum capital amount for newly chartered or licensed stablecoin issuers based on their business plan and risks, subject to a $5 million floor during a de novo period. Rather than a tiered formula tied to circulation, the OCC approach tailors capital to each business.
The OCC would also require stablecoin issuers to maintain readily available liquid assets equal to 12 months of total expenses as an operational backstop. This separate pool of liquid assets ties capital requirements to operating costs rather than stablecoin volume, creating a structural difference from the Fed's framework.
