Proposed Rule2026-19899
Application Procedures for Board-Supervised Insured Depository Institutions Seeking Approval for a Subsidiary To Issue Payment Stablecoins
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 29, 2026
Issuing agencies
Federal Reserve System
Abstract
The Board of Governors of the Federal Reserve System (Board) proposes to issue regulations that would establish procedures to be followed by an insured State member bank that seeks to obtain Board approval for a subsidiary to issue payment stablecoins pursuant to the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act).
Full Text
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<title>Federal Register, Volume 91 Issue 187 (Tuesday, September 29, 2026)</title>
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[Federal Register Volume 91, Number 187 (Tuesday, September 29, 2026)]
[Proposed Rules]
[Pages 61346-61361]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-19899]
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FEDERAL RESERVE SYSTEM
12 CFR Parts 247 and 262
[Docket No. R-1900]
RIN 7100-AH30
Application Procedures for Board-Supervised Insured Depository
Institutions Seeking Approval for a Subsidiary To Issue Payment
Stablecoins
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Board of Governors of the Federal Reserve System (Board)
proposes to issue regulations that would establish procedures to be
followed by an insured State member bank that seeks to obtain Board
approval for a subsidiary to issue payment stablecoins pursuant to the
Guiding and Establishing National Innovation for U.S. Stablecoins Act
(GENIUS Act).
DATES: Comments must be received by the Board on or before November 30,
2026.
ADDRESSES: You may submit comments, identified by Docket No. R-1900 and
RIN 7100-AH30, by any of the following methods:
<bullet> Agency website: <a href="https://www.federalreserve.gov/apps/proposals/">https://www.federalreserve.gov/apps/proposals/</a>. Follow the instructions for submitting comments, including
attachments. Preferred Method.
<bullet> Mail: Benjamin W. McDonough, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue NW,
Washington, DC 20551.
<bullet> Hand Delivery/Courier: Same as mailing address.
<bullet> Other Means: <a href="/cdn-cgi/l/email-protection#9aeaeff8f6f3f9f9f5f7f7fff4eee9dafce8f8b4fdf5ec"><span class="__cf_email__" data-cfemail="e19194838d8882828e8c8c848f9592a1879383cf868e97">[email protected]</span></a>. You must include the
docket number in the subject line of the message.
Comments received are subject to public disclosure. In general,
comments received will be made available on the Board's website at
<a href="https://www.federalreserve.gov/apps/proposals/">https://www.federalreserve.gov/apps/proposals/</a> without change and will
not be modified to remove personal or business information including
confidential, contact, or other identifying information. Comments
should not include any information such as confidential information
that would not be appropriate for public disclosure. Public comments
may also be viewed electronically or in person in Room M-4365A, 2001 C
St. NW, Washington, DC 20551, between 9 a.m. and 5 p.m. during Federal
business weekdays.
FOR FURTHER INFORMATION CONTACT: Lucy Chang, Assistant General Counsel,
(202) 475-6331, Kelley O'Mara, Assistant General Counsel, (202) 430-
0911, Isabel Echarte, Senior Attorney, (202) 945-2412, and Harrison
Clanton, Attorney, (202) 923-7765, Legal Division; or Vaishali Sack,
Deputy Associate Director, (202) 579-6684, Patrick Grant, Manager,
(202) 714-4532, and Alex Noussias, Senior Analyst, (240) 517-9688,
Division of Supervision and Regulation. For users of TTY-TRS, please
call 711 from any telephone, anywhere in the United States or (202)
263-4869.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Background and Legal Authority
III. Proposed Rule
A. Applicants
B. Rules of Procedure
C. Framework for Receiving and Reviewing Applications
1. Timing and Informational Completeness
2. Statutory Factors
3. Information Submitted as Part of an Application
4. Initial Action on an Application
5. Safe Harbor for Pending Applications
D. Opportunity for a Hearing and Final Determination
1. Overview
2. Rules of Procedure for Hearings
IV. Impact of Proposed Rule
V. Administrative Law Matters
A. Solicitation of Comment and Use of Plain Language
B. Regulatory Flexibility Act
C. Paperwork Reduction Act
D. Riegle Community Development and Regulatory Improvement Act
of 1994
E. Providing Accountability Through Transparency Act of 2023
I. Introduction
The Board of Governors of the Federal Reserve System (Board) is
issuing this notice of proposed rulemaking (proposed rule) to implement
certain application provisions in the Guiding and Establishing National
Innovation for U.S. Stablecoins Act (the GENIUS Act or the Act).\1\ The
Board proposes to issue the proposed rule as subpart D to Regulation UU
in 12 CFR part 247.\2\ The proposed rule would establish a tailored
application process for an insured State member bank (applicant) to
obtain approval from the Board for a subsidiary to issue payment
stablecoins.\3\ The application process in the proposed rule is
designed to enable the Board to
[[Page 61347]]
effectively evaluate the safety and soundness of the applicant's
proposed activities based on the factors set out in the GENIUS Act,
while minimizing unnecessary regulatory burden on applicants.
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\1\ Public Law 119-27, 139 Stat. 419 (codified at 12 U.S.C. 5901
et seq.).
\2\ In this proposed rule, other portions of 12 CFR part 247 are
being reserved. The Board is concurrently proposing regulations to
implement the other portions of the GENIUS Act at 12 CFR part 247 as
Regulation UU.
\3\ The Board is proposing to define the term ``payment
stablecoin'' consistent with the definition of the term in section
2(22) of the GENIUS Act (12 U.S.C. 5901(22)). The GENIUS Act defines
a payment stablecoin as a digital asset (i) that is, or is designed
to be, used as a means of payment or settlement, and (ii) the issuer
of which (A) is obligated to convert, redeem, or repurchase for a
fixed amount of monetary value and (B) represents or creates the
reasonable expectation that it will maintain a stable value relative
to a fixed amount of monetary value. 12 U.S.C. 5901(22)(A). The
GENIUS Act further provides that the term payment stablecoin does
not include a digital asset that is a national currency, a deposit,
or a security. 12 U.S.C. 5901(22)(B).
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II. Background and Legal Authority
Under the GENIUS Act, subject to certain exceptions, only a
permitted payment stablecoin issuer (PPSI) may issue payment
stablecoins in the United States.\4\ A PPSI is a person formed in the
United States that is (i) a subsidiary of an insured depository
institution that has been approved to issue payment stablecoins by its
primary Federal payment stablecoin regulator; (ii) a Federal qualified
payment stablecoin issuer approved by the Office of the Comptroller of
the Currency (OCC); or (iii) a State-qualified payment stablecoin
issuer approved by its State payment stablecoin regulator.\5\ The
primary Federal payment stablecoin regulator of a PPSI that is a
subsidiary of an insured depository institution is the appropriate
Federal banking agency of the insured depository institution, as that
term is defined in section 3 of the Federal Deposit Insurance Act (FDI
Act),\6\ or the National Credit Union Administration in the case of a
subsidiary of an insured credit union, as that term is defined in
section 2 of the GENIUS Act.\7\ Accordingly, an insured State member
bank must obtain the prior approval of the Board for a subsidiary to
become a Board-supervised PPSI \8\ and issue payment stablecoins.
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\4\ 12 U.S.C. 5902, 5916.
\5\ 12 U.S.C. 5901(23).
\6\ See 12 U.S.C. 5901(1), (25).
\7\ See 12 U.S.C. 5901(25), (33).
\8\ Proposed section 247.2 defines ``Board-supervised PPSI'' to
mean a PPSI supervised and regulated by the Board pursuant to the
GENIUS Act (12 U.S.C. 5901 et seq.).
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Section 5(a)(1) of the GENIUS Act provides that the Board shall
receive, review, and consider applications from any insured State
member bank that seeks approval for a subsidiary to become a Board-
supervised PPSI and issue payment stablecoins.\9\ The GENIUS Act
requires the Board to promulgate rules for processing applications
submitted under section 5 of the GENIUS Act.\10\ The framework
established by the Board, including with respect to licensing, must
prioritize the safety and soundness of the applicant, including its
Board-supervised PPSI subsidiary.\11\ Additionally, the Federal Reserve
Act and other Federal statutes provide the Board with authority over
the supervision and regulation of State member banks, including with
respect to their investments in, and the activities of,
subsidiaries.\12\
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\9\ 12 U.S.C. 5904(a)(1). The Board is proposing to define the
term ``State member bank'' to mean a State-chartered bank that has
been approved for membership in the Federal Reserve System. This
term is similar to the definition of ``State member bank'' as set
forth in section 3(d) of the Federal Deposit Insurance Act (12
U.S.C. 1813(d)(2)).
\10\ 12 U.S.C. 5904(a)(2)(A); see also 5 U.S.C. 552(a)(1).
\11\ 12 U.S.C. 5904(a)(1)(B).
\12\ See, e.g., 12 U.S.C. 248, 321-339a, 483, 602, 1818, 1828,
1831o, 1831p-1 (implemented in 12 CFR part 208).
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The Board is required to evaluate and make a determination on a
``substantially complete application'' using the factors listed in
section 5(c) of the GENIUS Act, including the proposed Board-supervised
PPSI's ability to meet statutory and regulatory requirements, as well
as other factors related to management and safety and soundness.\13\ As
described in greater detail below, upon the receipt of a substantially
complete application, the Board must render a decision on the
application within 120 days.\14\ Additionally, as described in greater
detail below, the Board may deny a substantially complete application
only upon determining that the activities of the applicant, including
the activities of the proposed Board-supervised PPSI, would be unsafe
or unsound based on the factors set out in the GENIUS Act.\15\ The
GENIUS Act sets out a process by which applicants may appeal a denial,
as discussed in greater detail in section III.D of this Supplementary
Information.\16\
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\13\ 12 U.S.C. 5904(a)(3), (c).
\14\ 12 U.S.C. 5904(d)(1)(A).
\15\ 12 U.S.C. 5904(d)(2)(A)(i).
\16\ 12 U.S.C. 5904(d)(2)(C).
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The GENIUS Act also provides the Board and other Federal regulators
authority to issue other rules, including prudential requirements, for
PPSIs.\17\ The Board is concurrently proposing additional rules in a
separate notice to implement those provisions of the GENIUS Act.
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\17\ See, e.g., 12 U.S.C. 5903(h) and 5913.
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III. Proposed Rule
The proposed rule would set out a process for insured State member
banks to apply to the Board for prior approval for a subsidiary to
issue payment stablecoins using the applications process and
requirements set out in the GENIUS Act. The proposed rule would: (i)
describe the scope of the application requirements; (ii) set out rules
of procedure governing such applications; (iii) specify the information
that applicants must submit; and (iv) establish a process governing the
appeal, hearings, and final determination for applications. These
provisions in the proposal would not apply to uninsured State member
banks.\18\
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\18\ An uninsured State member bank may apply to its home State
payment stablecoin regulator in order to become a PPSI that is a
State qualified payment stablecoin issuer. 12 U.S.C. 5901(31). In
such case, although no application need be submitted to the Board by
the bank under the GENIUS Act, the uninsured State member bank would
remain subject to requirements otherwise applicable to State member
banks, in addition to requirements applicable to the entity as a
State-qualified payment stablecoin issuer.
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A. Applicants
The GENIUS Act provides that when an insured State member bank
seeks approval for a subsidiary to issue payment stablecoins, the
insured State member bank is the entity that must file an application
with the Board. Section 247.2 of the proposed rule defines
``applicant'' to mean an insured State member bank that has submitted
an application for a subsidiary to issue payment stablecoins pursuant
to section 5 of the GENIUS Act and section 247.30 of the proposed rule.
The GENIUS Act and section 247.2 of the proposed rule define the
term ``subsidiary'' by reference to the FDI Act, which states that a
subsidiary includes any company which is owned or controlled directly
or indirectly by another company.\19\ In the FDI Act, the term
``control'' is defined by reference to the Bank Holding Company Act
(BHC Act).\20\ The Board's Regulation Y sets out the Board's
presumptions of control and noncontrol under the controlling influence
prong of the BHC Act definition of ``control.'' \21\ The Board proposes
to evaluate whether an applicant would control a proposed Board-
supervised PPSI under the framework set out in the BHC Act and the
Board's Regulation Y. Accordingly, section 247.2 of the proposed rule
would define the term ``control'' such that a person \22\ (the ``first
person'') would control another person (the ``second person'') if: (i)
the first person directly or indirectly or acting through one or more
persons owns, controls, or has power to vote 25 percent or more of any
class of voting securities of the second person, (ii) the first person
controls in any manner the election of
[[Page 61348]]
a majority of the directors or trustees of the second person, or (iii)
the Board determines, after notice and opportunity for hearing, that
the first person directly or indirectly exercises a controlling
influence over the management or policies of the second person.\23\
This approach would be consistent with the statutory definitions in the
GENIUS Act.
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\19\ See 12 U.S.C. 5901(32) (``The term ``subsidiary'' has the
meaning given that term in [12 U.S.C. 1813].''); see also 12 U.S.C.
1813(w)(4).
\20\ 12 U.S.C. 1813(w)(5).
\21\ See 12 CFR part 225, subpart D.
\22\ The Board is proposing to define the term ``person'' as the
term is defined in section 2(24) of the GENIUS Act (12 U.S.C.
5901(24)). As proposed, the term ``person'' would mean an
individual, partnership, company, corporation, association, trust,
estate, cooperative organization, or other business entity,
incorporated or unincorporated.
\23\ See 12 U.S.C. 1841(a)(2).
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Question 1: What additional clarification, if any, would be helpful
regarding when an insured State member bank would be considered to
control a proposed Board-supervised PPSI?
Question 2: Under the GENIUS Act, the definition of ``subsidiary''
incorporates the definition of ``control'' under the BHC Act. The
Board's Regulation Y provides a regulatory framework for implementing
the statutory definition of ``control.'' What, if any, clarifications
to Board's control framework would be appropriate to address issues
specific to PPSIs and, in particular, insured State member banks that
seek approval for a subsidiary to issue payment stablecoins?
Question 3: How does the statutory requirement that an insured
State member bank control its proposed Board-supervised PPSI create
challenges or opportunities for a consortium model of stablecoin
issuance?
B. Rules of Procedure
The proposed rule would set out rules of procedure for applications
made to the Board under section 5 of the GENIUS Act.\24\ Section
247.30(b)(1) of the proposed rule would provide that the applicant must
submit its application to the appropriate Federal Reserve Bank, which
will promptly send a copy of the application to the Board. The
applicant would submit information in the form of an application by
letter containing the information listed in the regulation, as
described in greater detail below. Section 247.30(b)(2) of the proposed
rule would provide that the application must (i) be signed by a duly
authorized agent of the applicant; (ii) describe the proposal,
including all relevant facts, and the action requested; and (iii)
indicate the reasons why the application should be approved, addressing
the factors set out in section 5(c) of the GENIUS Act, which are
discussed in greater detail in section III.C.2 of this Supplementary
Information.\25\ The proposed rule also identifies, and would require
the submission of, information necessary for the Board to evaluate the
statutory factors that it must consider under the GENIUS Act and the
proposed rule, as discussed in greater detail in section III.C.3 of
this Supplementary Information.
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\24\ The proposed rule would also amend 12 CFR 262.3 to clarify
that the existing applications processes set out in that section do
not apply to an application by an insured State member bank that
seeks approval for a subsidiary to issue payment stablecoins
pursuant to the GENIUS Act. Instead, the more specific procedures in
the proposed rule would apply.
\25\ 12 U.S.C. 5904(c).
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Section 247.30(h) of the proposed rule would further specify that
the Board may, in exceptional circumstances and to the extent
consistent with the GENIUS Act, waive the requirements in this proposed
rule or adopt different procedures. For example, the Board may elect to
waive or change the requirements for an application involving
structures where the applicant does not propose to own 100 percent of
the proposed Board-supervised PPSI, including structures involving more
than one bank. If a proposed payment stablecoin is to be issued by a
subsidiary of multiple banks through a consortium, the Board may agree
to accept and process a single application on behalf of all insured
State member banks of the consortium if the consortium could be
considered a subsidiary of each.
State member banks may request feedback prior to submitting a
potential application for a subsidiary to issue payment
stablecoins.\26\ In general, the pre-filing process can be beneficial
to entities submitting complex proposals or seeking feedback on
specific areas regarding a proposal.
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\26\ The Board has an existing process for State member banks
and others to seek feedback in advance of submitting an application.
See SR 12-12/CA 12-11, Implementation of a New Process for
Requesting Guidance from the Federal Reserve Regarding Bank and
Nonbank Acquisitions and Other Proposals (July 11, 2012).
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Question 4: What other considerations should the Board and the
other agencies take into account in processing applications involving a
consortium of insured depository institutions? What are approaches the
agencies could take to coordinate review of filings involving multiple
insured depository institutions with different primary Federal
regulators?
Question 5: What are the advantages and disadvantages of having a
consortium-owned PPSI submit relevant application(s) on behalf of its
members versus each insured depository institution individually
submitting an application to its primary Federal regulator?
C. Framework for Receiving and Reviewing Applications
1. Timing and Informational Completeness
The GENIUS Act states that an application shall be considered
substantially complete if it contains sufficient information for the
Board to render a decision on whether the applicant satisfies the
factors described in section 5(c) of the GENIUS Act.\27\ Section
5(d)(1)(B)(ii) of the GENIUS Act provides that, not later than 30 days
after receiving an application, the Board must notify the applicant as
to whether the Board considers the application to be substantially
complete and, if the application is not substantially complete, specify
the additional information the applicant shall provide in order for the
application to be considered substantially complete.\28\ An application
will be considered substantially complete as of the date that the
appropriate Federal Reserve Bank received the final materials necessary
for the application to be deemed substantially complete (the
``submission date''), not the date on which the Board sends a
notification to the applicant regarding the substantially complete
determination. Section 5(d)(1)(A) of the GENIUS Act provides that the
Board shall render a decision on the application not later than 120
days after the submission date.\29\ Under section 5(d)(3) of the GENIUS
Act, if the Board fails to render a decision on a complete application
within 120 days of the submission date, the application shall be deemed
approved.\30\
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\27\ 12 U.S.C. 5904(d)(1)(B)(i).
\28\ 12 U.S.C. 5904(d)(1)(B)(ii).
\29\ 12 U.S.C. 5904(d)(1)(A).
\30\ 12 U.S.C. 5904(d)(3).
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Paragraphs (c) and (e) of section 247.30 of the proposed rule would
generally restate the timing and informational completeness
requirements of the GENIUS Act. Further, section 247.30(c)(1) of the
proposed rule would clarify that an application would not be considered
substantially complete if the applicant has omitted any information
necessary for evaluating the statutory factors that the Board must
consider under section 5 of the GENIUS Act. Examples of instances where
the Board might not consider an application to be substantially
complete include, but are not limited to, (i) if the application does
not provide all of the information required by the proposed rule; (ii)
if the information provided in the application contains significant
gaps or is unclear in any material respect related to the
[[Page 61349]]
statutory factors; or (iii) if the Board determines that there are
issues or deficiencies in the information provided that must be
resolved (including through the submission of additional information)
in order for the Board to consider the statutory factors.
Section 5(d)(1)(iii) of the GENIUS Act provides that an application
considered substantially complete remains substantially complete unless
there is a material change in circumstances that requires the Board to
treat the application as a new application.\31\ Under section
247.30(c)(2) of the proposed rule, an application that has been
considered substantially complete may be considered to no longer be
substantially complete if the Board becomes aware that, due to a
material change in circumstances, the information received as of the
submission date is no longer sufficient for the Board to evaluate all
statutory factors with respect to the application. A material change in
circumstances may arise, for example, if (i) the applicant's financial
condition deteriorates, (ii) the applicant materially alters the
business plan of the proposed Board-supervised PPSI, or (iii) there are
changes to the ownership structure of the proposed Board-supervised
PPSI (such as new principal shareholders). Upon the appropriate Federal
Reserve Bank's receipt of supplementary information that provides the
Board with information necessary to render a decision under the statute
and the proposed rule, the Board will assign a new submission date, and
the 120-day clock will restart as of the new submission date.\32\
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\31\ 12 U.S.C. 5904(d)(1)(iii).
\32\ In such cases, the applicant will not need to withdraw the
application; rather, once the necessary information has been
provided, the Board will process the application consistent with the
new submission date and related 120-day period.
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Additionally, section 247.30(c)(4) of the proposed rule would
clarify that information submitted within business hours on a business
day in the time zone of the appropriate Federal Reserve Bank will be
deemed to have been received by the appropriate Federal Reserve Bank on
that day.\33\ Information submitted on a non-business day or outside
business hours would be deemed to be received on the next business day.
This approach generally is consistent with the Board's current practice
on other applications matters.
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\33\ Applicants are encouraged to submit applications through
FedEZFile, which can be accessed through <a href="https://www.federalreserve.gov/supervisionreg/afi/fedezfile-fluent.htm">https://www.federalreserve.gov/supervisionreg/afi/fedezfile-fluent.htm</a>.
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2. Statutory Factors
Section 5(c) of the GENIUS Act sets out a list of factors that the
Board must consider when reviewing an application.\34\ These factors
are restated in section 247.30(d) of the proposed rule and are
explained briefly below.
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\34\ 12 U.S.C. 5904(c).
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Ability to Meet Requirements Under Section 4 of the GENIUS Act.
Under section 5(c)(1) of the GENIUS Act, the Board must evaluate the
ability of the proposed Board-supervised PPSI,\35\ based on financial
condition and resources, to meet the requirements set forth under
section 4 of the GENIUS Act.\36\ Among other things, section 4 of the
GENIUS Act requires that a PPSI must: (i) maintain identifiable
reserves backing the outstanding payment stablecoins on at least a one-
to-one basis, comprising specified categories of reserves; (ii) publish
the composition of reserves on a monthly basis; (iii) adhere to
capital, liquidity, and risk management requirements promulgated by the
Board; (iv) comply with applicable Bank Secrecy Act \37\ requirements
and other requirements relating to economic sanctions, the prevention
of money laundering and countering the financing of terrorism, and
customer identification and due diligence; (v) observe limitations on
permissible activities; (vi) comply with provisions prohibiting
specific conduct or activities, such as the prohibition on the use of
deceptive names; and (vii) have the technological capability to comply,
and actually comply, with the terms of any lawful order.\38\ The Board
is concurrently proposing rules to implement section 4 of the GENIUS
Act. The ability to comply with any such rules will be part of the
Board's evaluation under this factor.
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\35\ As discussed in section III.A of this Supplementary
Information above, the ``applicant'' for purposes of section 5 of
the GENIUS Act and the proposed rule is an insured State member bank
seeking approval for a subsidiary to issue payment stablecoins.
However, in paragraph 5(c)(1) of the GENIUS Act, the term
``applicant'' is clarified to refer to the PPSI subsidiary of an
applicant that is an insured depository institution. The proposed
rule interprets this clarification to apply to all of the factors in
subsection 5(c) of the GENIUS Act that use the term ``applicant.''
This approach would align the scope of the statutory factor in
section 5(c)(2) of the GENIUS Act to the substantive requirement in
section 4(f) of the GENIUS Act, which prohibits any individual who
has been convicted of a felony offense involving insider trading,
embezzlement, cybercrime, money laundering, financing of terrorism,
or financial fraud from serving as an officer or director of a PPSI.
12 U.S.C. 5903(f), 5904(c)(2). Additionally, it would align the
statutory factor in section 5(c)(4) of the GENIUS Act to section
4(a)(1)(B) of the GENIUS Act, which requires a PPSI to have a
redemption policy meeting certain specified requirements. 12 U.S.C.
5903(a)(1)(B), 5904(c)(4).
\36\ 12 U.S.C. 5903.
\37\ The ``Bank Secrecy Act'' is defined to refer to (1) section
21 of the FDI Act (12 U.S.C. 1829b); (2) chapter 2 of title I of
Public Law 91-508 (12 U.S.C. 1951 et seq.); and (3) subchapter II of
chapter 53 of title 31, United States Code and notes thereto (31
U.S.C. 5311 et seq.). 12 U.S.C. 5901(2). The proposal would add the
phrase ``and notes thereto'' as a clarification.
\38\ See generally 12 U.S.C. 5903(a).
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As part of the evaluation of this statutory factor, the proposed
rule would provide that an applicant must demonstrate that a proposed
Board-supervised PPSI has the ability to come into compliance with any
capital rules applicable to Board-supervised PPSIs, once such rules
become effective.\39\ Until capital requirements applicable to Board-
supervised PPSIs become effective, an applicant would need to
demonstrate that the proposed Board-supervised PPSI would have
sufficient initial capital, net of any organizational expenses that
would be charged to the PPSI's capital after it begins operations, to
support the proposed Board-supervised PPSI's projected volume and type
of business as outlined in the business plan. An applicant should also
provide to the Board a longer-term capital plan that indicates that the
Board-supervised PPSI would have sufficient financial, managerial, and
operational resources to support the future projected volume and type
of business.
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\39\ The Board is concurrently proposing rules to implement the
other provisions of the GENIUS Act, including the Act's provisions
regarding capital. See proposed sections 247.15-.18.
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Factors Related to Management. The Board must also consider certain
factors related to management described in section 5(c)(2) and 5(c)(3)
of the GENIUS Act. Under section 5(c)(2) of the GENIUS Act, the Board
must consider whether an individual who has been convicted of a felony
offense involving insider trading, embezzlement, cybercrime, money
laundering, financing of terrorism, or financial fraud is serving as an
officer or director \40\ of the proposed Board-
[[Page 61350]]
supervised PPSI.\41\ Under section 5(c)(3) of the GENIUS Act, the Board
must consider the competence, experience, and integrity of the
officers, directors, and principal shareholders of the proposed Board-
supervised PPSI, its subsidiaries, and parent company, including--(A)
the record of those officers, directors, and principal shareholders of
compliance with laws and regulations; and (B) the ability of those
officers, directors, and principal shareholders to fulfill any
commitments to, and any conditions imposed by, their primary Federal
payment stablecoin regulator in connection with the application at
issue and any prior applications.\42\
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\40\ The proposed rule would define the term ``director'' to
mean an individual who serves on the board of directors of an
entity, except an advisory director who (1) is not elected by the
shareholders of the entity, (2) does not have the authority to vote
on matters before the board of directors or any committee of the
board of directors, and (3) provides solely general policy advice to
the board of directors or any committee. The proposed rule would
define the term ``board of directors'' to mean an entity's board of
directors or the group of individuals that serve the nearest
equivalent function of acting as the governing body of an entity.
These definitions are generally consistent with definitions of these
terms in other rules. See, e.g., 12 CFR 215.2(d)(1) (director);
225.31(e)(1) (board of directors), and would address the various
organizational forms used by entities, including those that do not
have a traditional board of directors.
\41\ 12 U.S.C. 5904(c)(2); see also 12 U.S.C. 5903(f).
\42\ 12 U.S.C. 5904(c)(3).
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Redemption Policy. Under section 5(c)(4) of the GENIUS Act, the
Board must also consider whether the redemption policy of the proposed
Board-supervised PPSI meets the standards under 12 U.S.C.
5903(a)(1)(B).\43\ The GENIUS Act requires that a PPSI publicly
disclose its redemption policy. The GENIUS Act also provides that the
redemption policy must: (i) establish clear and conspicuous procedures
for timely redemption of outstanding payment stablecoins; and (ii)
publicly, clearly, and conspicuously disclose, in plain language, all
fees associated with purchasing or redeeming its payment stablecoins,
provided that such fees can only be changed with not less than seven
days' prior notice to consumers.\44\
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\43\ 12 U.S.C. 5904(c)(4). The Board is concurrently proposing
rules to implement the other provisions of the GENIUS Act, including
the Act's provisions regarding redemption policies and disclosures.
See proposed section 247.12.
\44\ 12 U.S.C. 5903(a)(1)(B).
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3. Information Submitted as Part of an Application
Under the proposed rule, the applicant would submit information to
the appropriate Federal Reserve Bank in the form of an application by
letter that would contain all applicable information listed in the
regulation. The Board is not proposing to issue a separate form at this
time. The Board is adopting a tailored approach whereby applicants that
are proposing to own 100 percent of a Board-supervised PPSI would
generally not be expected to submit certain information, including
information that is already available to the Board. However, the Board
may seek additional information where necessary to evaluate the
statutory factors (see section 247.30(b)(3)(ii), (b)(5) of the proposed
rule). Further, whenever possible, the Board would utilize information
already available to it as the primary Federal regulator of the
applicant, such as supervisory and examination information, rather than
requiring submission of duplicative information as part of an
application.
Under section 247.30(b)(2) of the proposed rule, the application
must include a business plan; financial information; relevant policies,
procedures, terms, and agreements; documentation relating to the
capital structure of the proposed Board-supervised PPSI; biographical
reports; certifications regarding certain felony offenses; and a
certification that the filing submitted to the Board, including any
supporting materials, contains no material misrepresentations or
omissions. This information is necessary to evaluate the factors in
section 5(c) of the GENIUS Act and to determine whether the activities
of the applicant, including the activities of the proposed Board-
supervised PPSI, would be unsafe or unsound.\45\
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\45\ 12 U.S.C. 5904(c) (factors), 5904(d)(2)(A) (grounds for
denial).
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Business Plan. As set out in section 247.30(b)(2)(i) of the
proposed rule, the business plan should include descriptions of: (i)
the proposed business model, including the proposed products, services,
and activities of the proposed Board-supervised PPSI, and the legal
basis under applicable Federal and State law for each proposed
activity, including any activities other than those enumerated in
section 4(a)(7)(A) of the GENIUS Act that would be conducted by the
proposed Board-supervised PPSI; \46\ (ii) contemplated affiliate \47\
transactions and relationships, including a description of how the
proposed Board-supervised PPSI would be controlled by the applicant;
(iii) the proposed organizational and governance structure; \48\ (iv)
any material third-party relationships; (v) identities, roles, and
responsibilities of all entities involved in the proposed related
activities; and (vi) how the proposed Board-supervised PPSI would
maintain compliance with the key requirements of the GENIUS Act and its
implementing regulations. The business plan should include information
on how the applicant plans for the payment stablecoin to maintain a
stable value, including a description of any applicant guarantees,
intercompany agreements, or relationships with third parties that would
distribute or participate in price discovery of or market-making for
the stablecoins issued by the proposed Board-supervised PPSI, or any
third parties that have control of the proposed Board-supervised PPSI's
private keys or the ability to directly mint and redeem stablecoins on
behalf of the proposed Board-supervised PPSI.
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\46\ 12 U.S.C. 5903(a)(7)(A).
\47\ The proposed rule would define the term ``affiliate'' to
mean a person that controls, is controlled by, or is under common
control with another person, which is generally consistent with the
definition in 12 U.S.C. 1841(k) and 12 CFR 225.2(a).
\48\ If a proposed payment stablecoin is to be issued by a
Board-supervised PPSI that is a subsidiary of more than one bank,
the Board would expect the application to include the governance
structure of such arrangement, including expected activities of the
other banks.
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Financial Information. Additionally, under section 247.30(b)(2)(ii)
of the proposed rule, applicants must include financial information
relevant to the proposed Board-supervised PPSI, including: (i) a
description of how the proposed Board-supervised PPSI would be funded
initially and on an ongoing basis, including whether it is anticipated
that an applicant or any individual would make a financial guarantee or
otherwise act to financially support the proposed Board-supervised PPSI
(including any related intercompany agreements); \49\ (ii) projected
stablecoin reserve assets and their composition; \50\ (iii) reserve
management plans; and (iv) financial projections, with accompanying
assumptions, for the first three years of operations for the proposed
Board-supervised PPSI. Such information would generally align with the
Board's practice of requesting three years of pro forma financial
statements as a component of other applications, such as for
applications for de novo State member banks.
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\49\ With respect to a planned capital and liquidity structure,
the Board may consider any planned financial commitments from the
applicant's or proposed Board-supervised PPSI's officers, directors,
and principals or shareholders, or if there is a plan to launch the
payment stablecoin as part of a consortium approach.
\50\ The Board would expect that information provided on reserve
assets and composition and their associated asset management plan to
include a description of the reserves, if any, that are proposed to
be in tokenized form and also a discussion of the scenarios under
which the reserve asset mix could change and what situations might
prompt that change. The Board is concurrently proposing rules to
implement the other provisions of the GENIUS Act, including the
Act's provisions regarding reserve assets, including monthly
disclosures and principles-based reserve asset diversification
standards, among other things. See proposed section 247.11.
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Policies and Procedures. Section 247.30(b)(2)(iii) of the proposed
rule would provide that the application should include relevant
policies and procedures; customer agreements, terms of use, or other
disclosures provided to customers; agreements with affiliates or third
parties; or other information that
[[Page 61351]]
would be necessary for evaluating the application. This would include
documents relating to (i) redemption; \51\ (ii) maintenance of required
reserve assets; \52\ (iii) custody of customer assets; \53\ (iv)
recordkeeping, reconciliation, and transaction processing; and (v)
compliance with Bank Secrecy Act, sanctions compliance program, anti-
money laundering, and countering the financing of terrorism
requirements.\54\ Draft or proposed documents may be submitted as part
of the application.
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\51\ See 12 U.S.C. 5904(c)(4). See also supra n.43.
\52\ See 12 U.S.C. 5903(a)(1)-(2).
\53\ See 12 U.S.C. 5909.
\54\ See 12 U.S.C. 5903(a)(5)-(6).
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Capital Structure. Under section 247.30(b)(2)(iv) of the proposed
rule, if the proposed Board-supervised PPSI is not wholly owned by the
applicant, the applicant must also provide documentation regarding the
capital structure of the proposed Board-supervised PPSI, including the
shares of each class of securities and total equity controlled by each
shareholder on a fully diluted and undiluted basis, general background
information for each shareholder with more than five percent of voting
securities, and the organizational documents and other agreements
governing the securities of the proposed Board-supervised PPSI.
Biographical and Personal Financial Information. Under section
247.30(b)(3) of the proposed rule, applicants also would be expected to
submit a biographical report and other information necessary to
initiate name checks \55\ for principal shareholders that are not State
member banks, as well as for the top two decision-makers of the
proposed Board-supervised PPSI. Individuals submitting this information
would be expected to submit legible electronic fingerprints for a
biometric-based criminal history search, consistent with current Board
practices, to complete background checks.\56\ This information is
necessary for evaluating the factors which the Board must consider when
evaluating an application under the GENIUS Act, including evaluating
the competence, experience, and integrity of the officers,\57\
directors, and principal shareholders of a proposed Board-supervised
PPSI, its subsidiaries, and its parent company.\58\ Principal
shareholders and the top two decision-makers of the proposed Board-
supervised PPSI would generally be required to submit the Biographical
Report and Certifications, but not the Financial Report or Supporting
Schedules, of the Interagency Biographical and Financial Report--FR
2081c (``IBFR'').\59\ Under section 247.30(b)(3)(iii) of the proposed
rule, the Board may waive these requirements in its discretion, such as
for individuals that have submitted an IBFR to the Board and undergone
name checks within the last five years, consistent with the Board's
procedures on other applications matters.
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\55\ See SR Letter 15-8: Name Check Process for Domestic and
International Applicants (June 25, 2015).
\56\ See SR Letter 20-20: Updated Fingerprinting Process Related
to Applications Reviewed by the Federal Reserve (August 14. 2020).
\57\ The proposed rule would define the term ``officer'' to mean
the president, chairman, chief executive officer, chief operating
officer, chief financial officer, chief investment officer, chief
risk officer, chief technology officer, and Bank Secrecy Act
officer. The term includes any individual serving in the functional
capacity of the listed titles or their equivalent, without regard to
title, salary, or compensation. The term ``officer'' would also be
defined to include any other person identified by the Board or
appropriate Federal Reserve Bank, whether or not hired as an
employee, with significant influence over, or who participates in,
major policymaking decisions of the entity. This definition is
generally consistent with the definition of senior executive officer
in 12 CFR 225.71(c).
\58\ 12 U.S.C. 5904(c)(3).
\59\ Available at <a href="https://www.federalreserve.gov/apps/reportingforms/Report/Index/FR_2081c">https://www.federalreserve.gov/apps/reportingforms/Report/Index/FR_2081c</a>.
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The proposed rule would define a principal shareholder as a person
who directly or indirectly or acting in concert with one or more
persons, or together with members of their immediate family,\60\ will
own, control, or hold the power to vote 10 percent or more of any class
of voting securities of an entity, or any person that the Board
determines has the power, directly or indirectly, to exercise a
controlling influence over the management or policies of an entity.
This definition is substantially similar to the definition in the IBFR
instructions and the Board's Regulation Y, 12 CFR 225.2(n)(2). The
proposed rule would state that an applicant may identify the top two
decision-makers of the proposed Board-supervised PPSI; however, the
Board reserves the right to determine that other persons are the top
two decision-makers.
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\60\ The Board is proposing to define the term ``immediate
family'' to mean the spouse of an individual, the individual's minor
children, and any of the individual's children (including adults)
having their domicile in the individual's home. This term is
consistent with the definition in the Board's Regulation O, 12 CFR
part 215.
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In section 247.30(d)(3)(ii) of the proposed rule, the Board has
reserved authority to seek additional biographical or personal
financial information with respect to officers, directors, and
principal shareholders of a PPSI, its subsidiaries, or its parent
companies, as necessary to evaluate the statutory factors. In general,
when a proposed Board-supervised PPSI would be wholly owned by a State
member bank and its officers and directors are already employed by the
State member bank, the Board expects that additional biographical and
personal financial information will not need to be collected or
reviewed. However, the Board may seek additional information, including
requesting the Financial Report or Supporting Schedules of the IBFR, in
certain cases as needed to evaluate the statutory factors. Such
information may be necessary, for example, (i) with respect to
individuals that are not contemporaneously employed by the State member
bank; (ii) when the proposed Board-supervised PPSI would not be wholly
owned by the State member bank; (iii) when an individual is making a
financial guarantee or otherwise agreeing to act to financially support
the proposed Board-supervised PPSI; or (iv) in other exceptional
circumstances.
Certifications. Relatedly, section 247.30(b)(4)(i) of the proposed
rule would require all officers and directors of the proposed Board-
supervised PPSI to certify that they have not been convicted of a
felony offense involving insider trading, embezzlement, cybercrime,
money laundering, financing of terrorism, or financial fraud.\61\ This
certification would help the Board to monitor compliance with section
4(f) of the GENIUS Act.\62\ Section 247.30(b)(4)(ii) would require an
authorized officer of the applicant to certify in writing that the
filing submitted to the Board, including any supporting materials,
contains no material misrepresentations or omissions. It would also
provide that the Board may review and verify any information filed in
connection with a notice or an application, and that any person
responsible for any material misrepresentation or omission in a filing
or supporting materials may be subject to enforcement action and other
penalties, including criminal penalties provided in 18 U.S.C. 1001.
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\61\ 12 U.S.C. 5904(c)(2).
\62\ 12 U.S.C. 5903(f). Section 4(f) of the GENIUS Act provides
that if a Federal payment stablecoin regulator has a reason to
believe that any person has knowingly violated that prohibition, the
Federal payment stablecoin regulator shall refer the matter to the
Attorney General. Id.
---------------------------------------------------------------------------
Additional Information. Section 247.30(b)(5) of the proposed rule
provides that the Board may, at any time, request additional
information that the Board, in its sole discretion, deems necessary for
evaluating the factors the Board must consider under
[[Page 61352]]
section 5(c) of the GENIUS Act.\63\ As applications often present
distinct facts and circumstances, the Board may need to request
additional information after receipt of the application to evaluate an
application under the statutory factors. In some cases, applicants may
require additional time to prepare and share certain information or
documents.
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\63\ 12 U.S.C. 5904(c).
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4. Initial Action on an Application
Section 5(d)(2)(A) GENIUS Act provides that the Board shall only
deny a substantially complete application if the Board determines that
the activities of the applicant, including the activities of its
proposed Board-supervised PPSI subsidiary, would be unsafe or unsound
based on the factors in section 5(c) of the GENIUS Act.\64\ Section
5(d)(2)(B) of the GENIUS Act further provides that, if the Board denies
a complete application, the Board shall provide the applicant with
written notice explaining the denial with specificity not later than 30
days after the date of such denial. The written explanation must
include all findings made by the Board with respect to all identified
material shortcomings in the application, including actionable
recommendations on how the applicant could address the identified
material shortcomings.\65\ Section 247.30(f) of the proposed rule would
restate these requirements.
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\64\ 12 U.S.C. 5904(d)(2)(A)(i). The Act also states that the
issuance of a payment stablecoin on an open, public, or
decentralized network shall not be a valid ground for denial of an
application. 12 U.S.C. 5904(d)(2)(A)(ii).
\65\ 12 U.S.C. 5904(d)(2)(B).
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For avoidance of doubt, section 247.30(f)(1) of the proposed rule
would clarify that inconsistency with any one of the factors in 12
U.S.C. 5904(c) may be sufficient to warrant denial to the extent that
the proposed activities of the applicant, including the activities of
its proposed Board-supervised PPSI, would be unsafe or unsound.
Additionally, the Board may deny an application or defer action on such
application if the record is not substantially complete and does not
provide information necessary to assess whether an application is
consistent with each statutory factor.\66\
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\66\ See 12 U.S.C. 5904(a)(3).
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With respect to approvals, the Board reserves the right to impose
conditions or commitments.\67\ Specifically, section 247.30(g) of the
proposed rule provides that the Board may impose conditions on any
approval, including conditions to address financial, managerial, safety
and soundness, compliance, or other concerns to ensure that approval is
consistent with the relevant statutory factors and other provisions of
the GENIUS Act.
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\67\ See 12 U.S.C. 5903(h)(1), 5904(c)(3)(B). Conditions imposed
in writing in connection with any application or other request may
be enforced in proceedings under applicable law. See 12 U.S.C.
5905(b)(2).
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5. Safe Harbor for Pending Applications
Section 5(f) of the GENIUS Act provides that the Board may waive
the application of the requirements of the GENIUS Act for a period not
to exceed 12 months beginning on the effective date of the GENIUS Act,
with respect to a proposed Board-supervised PPSI, if the applicant has
an application pending for the subsidiary to become a Board-supervised
PPSI on that effective date.\68\ The Board would invite such an
applicant to submit, together with an application, a written request
for a waiver that explains the basis for the request, the extent of the
requirement(s) to be waived, and the time period requested, as well as
the applicant's plan for coming into compliance with the relevant
requirement(s).
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\68\ 12 U.S.C. 5904(f).
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Question 6: What additional clarification, if any, is needed
regarding when an application would be considered substantially
complete or regarding when a material change may arise? What additional
clarification, if any, is needed with respect to the statutory deadline
for initial action on an application?
Question 7: What additional clarification, if any, would be
beneficial regarding the applications process generally?
Question 8: The proposed rule would require applicants to submit an
application by letter containing specified information. Should the
Board consider requiring applicants to instead submit a structured
form? What are the advantages and disadvantages of each approach?
Question 9: Section 5(c) of the GENIUS Act states that the Board
may establish any other factors to be considered. Should the Board
consider establishing any additional factors? For example, consistent
with the framework's prioritization of the safety and soundness of
insured State member banks that seek to issue payment stablecoins
through a Board-supervised PPSI, should the Board consider evaluating
as a separate factor whether, in the judgment of the Board, the
proposed activities of the Board-supervised PPSI would negatively
impact the safety and soundness of the applicant? The Board welcomes
comments on the advantages and disadvantages of adding such a factor.
To the extent the Board should consider other factors, please describe
the additional factors that the Board should consider and why those
factors would be necessary to consider whether the activities of the
applicant, including the activities of its proposed Board-supervised
PPSI, would potentially be unsafe or unsound.
Question 10: Does the proposed rule request the types of policies,
procedures, terms, and customer agreements of the applicant or proposed
Board-supervised PPSI necessary to evaluate the factors? Should the
Board consider any additional documents that would be necessary to
evaluate the statutory factors, or should it adjust or further clarify
the documents presently proposed for inclusion?
Question 11: What types of information should applicants submit to
the Board to substantiate the sufficiency of the capital or liquidity
structures of their proposed Board-supervised PPSI? What information
would best demonstrate the appropriate composition, custody, and
valuation of the reserve assets backing a payment stablecoin? How
should the Board evaluate this information in the period prior to rules
setting out prudential requirements for Board-supervised PPSIs being
finalized?
Question 12: In addition to the informational requirements
discussed in section III.C.3 of this Supplementary Information, what
information, if any, should the Board request to evaluate ownership or
control structures with respect to Board-supervised PPSIs that are not
wholly owned by a single State member bank, consistent with the
statutory factors?
Question 13: The proposed rule would require principal shareholders
that are not State member banks as well as the top two decision-makers
of the proposed Board-supervised PPSI to submit the Biographical Report
and Certifications of the IBFR and legible electronic fingerprints for
a biometric-based criminal history search. Under the proposed rule, the
Board would also reserve the right to request additional biographical
or personal financial information with respect to officers, directors,
and principal shareholders of the PPSI, its subsidiaries, or its parent
companies as necessary to evaluate the statutory factors. Should the
proposed rule instead require all officers, directors, and principal
shareholders to submit a full IBFR? What are the advantages and
disadvantages of this alternative approach? To what extent would such
information be beneficial or unnecessary to evaluate the statutory
factors?
[[Page 61353]]
Question 14: How, if at all, could the Board further streamline
informational requirements set out in the rule with respect to insured
State member banks that propose to own 100 percent of a Board-
supervised PPSI?
Question 15: More generally, how, if at all, should the
informational expectations described in the proposal be altered to
enable the Board to evaluate the factors while minimizing the
applicant's burden?
Question 16: The Board is not proposing to include a provision in
the proposed regulatory text regarding procedures for requesting a
waiver under the GENIUS Act's safe harbor provision due to the
temporary nature of the provision and the case-by-case analysis
required for any waiver. Should the Board include regulatory text on
this provision? Why or why not? In what circumstances might an
applicant request a waiver of provisions of the GENIUS Act, and what
provisions would the applicant be likely to request to be waived?
Question 17: Certain stablecoin issuers currently issue more than
one payment stablecoin; for example, some stablecoin issuers provide
``white label'' services for stablecoin issuance. How should the Board
review applications from entities proposing to issue more than one
payment stablecoin? What are the advantages and disadvantages of
requiring a new application, as part of this proposed rule or as a
condition of the approval of an application, for each new stablecoin
issued by a Board-supervised PPSI? What are the advantages and
disadvantages of requiring applicants applying for approval under
section 5 of the GENIUS Act to submit information regarding proposals
or plans to issue multiple payment stablecoins, or to submit such
information going forward following approval?
Question 18: Is the term ``director'' sufficiently clear? How could
the Board further clarify the term?
Question 19: Should the definition of ``principal shareholder'' or
any other definitions explicitly incorporate governance instruments
other than securities providing voting rights with respect to the
activities of a Board-supervised PPSI? In particular, are there
governance instruments that may not qualify as securities that the
Board should incorporate or instruments common to partnerships that the
Board should consider?
D. Opportunity for a Hearing and Final Determination
1. Overview
If the Board denies an application by an insured State member bank
for a subsidiary to issue payment stablecoins, section 5(d)(2)(C) of
the GENIUS Act provides that an applicant may request, in writing, an
opportunity for a written or oral hearing before the Board to appeal
the denial not later than 30 days after the applicant receives notice
of the denial.\69\ Upon receipt of a timely request for a hearing, the
Board shall notice a time, not later than 30 days after the date of
receipt of the request, and place at which the applicant may appear,
personally or through counsel, to submit written materials or provide
oral testimony and oral argument.\70\ Not later than 60 days after the
date of that hearing, the Board shall notify the applicant of a final
determination, which shall contain a statement of the basis for that
determination, with specific findings.\71\ If an applicant does not
make a timely request for a hearing, the Board shall notify the
applicant, not later than 10 days after the date by which the applicant
may request a hearing, in writing, that the denial of the application
is a final determination of the Board.\72\ Section 5(d)(4) of the
GENIUS Act states that denial of an application by an insured State
member bank seeking approval for a subsidiary to issue payment
stablecoins shall not prohibit an applicant from filing a subsequent
application.\73\
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\69\ 12 U.S.C. 5904(d)(2)(C)(i).
\70\ 12 U.S.C. 5904(d)(2)(C)(ii).
\71\ 12 U.S.C. 5904(d)(2)(C)(iii).
\72\ 12 U.S.C. 5904(d)(2)(C)(iv).
\73\ 12 U.S.C. 5904(d)(4).
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The Board must establish a process and framework regarding
applications by insured State member banks seeking approval for a
subsidiary to issue payment stablecoins, including with respect to
hearings, appeals, and final determinations.\74\ Section 247.31 of the
proposed rule would set out rules of procedure governing written and
oral hearings and would set a standard for reversing any denial.\75\
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\74\ 12 U.S.C. 5904(a)(1)(B); see also 5 U.S.C. 552(a)(1).
\75\ For avoidance of doubt, a State member bank requesting a
hearing regarding a denial of an application submitted pursuant to
section 5 of the GENIUS Act would be required to use the hearings,
appeals, and final determinations process set out in this rule and
may not appeal that denial using the internal appeals process for
material supervisory determinations set out in SR Letter 20-28/CA
Letter 20-14: Internal Appeals Process for Material Supervisory
Determinations and Policy Statement Regarding the Ombudsman for the
Federal Reserve System (December 4, 2020).
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2. Rules of Procedure for Hearings
The proposed rule would restate the hearing, appeals, and final
determination processes provided for in section 5(d)(2)(C) of the
GENIUS Act and summarized above, with additional clarifying information
regarding those processes.\76\ Section 247.31(a) of the proposed rule
would state that not later than 30 days after the date on which the
applicant receives a notice denying an application under section
247.30(f) of the proposed rule, the applicant may submit a written
request to the appropriate Federal Reserve Bank \77\ requesting an
opportunity for a written or oral hearing before the Board to appeal
the denial. Section 247.31(a) of the proposed rule would also provide
that an applicant must specify the reasons why the Board should
reconsider its denial, addressing the factors the Board may consider
(described in greater detail below) and provide any supporting
documentation.
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\76\ These rules of procedure are consistent with the
requirements for informal adjudications under the Administrative
Procedure Act, including 12 U.S.C. 555. The use of informal
procedures also would be consistent with other banking applications.
See, e.g., 12 CFR 262.3(k). For avoidance of doubt, any hearings
under section 5 of the GENIUS Act would not be subject to the
Board's Uniform Rules of Practice and Procedure in 12 CFR part 263.
See 12 CFR 263.1.
\77\ Applicants are encouraged to submit such requests through
FedEZFile.
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Section 247.31(b)(1) of the proposed rule would state that upon
receipt of a timely request for a hearing, the Board shall notice a
time, not later than 30 days after the Board receives the request, and
place at which the applicant may appear, personally or through counsel,
to submit written materials or provide oral testimony and oral
argument. Section 247.31(b)(2) of the proposed rule would state that
the applicant must submit all written materials, arguments, and
relevant documentation to the appropriate Federal Reserve Bank on or
before the time of the hearing. Section 247.31(b)(2) of the proposed
rule would also state that to the extent the applicant provides new
information, the applicant must explain why such information was not
provided prior to the date of action on the application. The Board may,
in its discretion, consider any written materials, arguments, or
relevant documentation submitted after the applicable date.
The proposed rule would set a standard for when the Board may, in a
final determination following such hearing, approve an application that
was previously denied. Section 247.31(c) of the proposed rule would
[[Page 61354]]
state that the Board may approve an application that was denied if the
applicant presented relevant facts that, for good cause shown, were not
previously presented to the Board, and, based on such new information,
the application is consistent with approval under the statutory
factors. The proposed rule would specify that the Board also may
approve an application that was denied for any other reason the Board
determines justifies relief. These standards are consistent with the
Board's standard for evaluating reconsideration requests under its
rules of procedure governing other applications.\78\ Specifying these
standards in the proposed rule would improve transparency regarding how
the Board would evaluate information submitted in connection with a
hearing. In the Board's experience acting on reconsideration requests
in other contexts, these standards would appropriately balance an
applicant's interest in a fair process with the considerations related
to appropriate management of Board resources.
---------------------------------------------------------------------------
\78\ See 12 CFR 262.3(k).
---------------------------------------------------------------------------
The proposed rule would also restate the timing for notifying the
applicant of its final determination in section 5(d)(2)(C)(iii)-(iv) of
the GENIUS Act. Specifically, section 247.31(d)(1) of the proposed rule
would state that not later than 60 days after the time of the hearing
under this section, the Board shall notify the applicant of a final
determination, which shall contain a statement of the basis for that
determination, with specific findings. Section 247.31(d)(2) of the
proposed rule would state that if an applicant does not make a timely
request for a hearing, the Board shall notify the applicant, not later
than 10 days after the date by which the applicant may request a
hearing, in writing, that the denial of the application is a final
determination of the Board. Consistent with section 5(d)(4) of the
GENIUS Act, section 247.31(e) would state that the denial of an
application shall not prohibit the applicant from filing a subsequent
application.
Question 20: In what additional circumstances, if any, should the
Board consider approving an application that was previously denied?
Question 21: What additional clarification, if any, would be
necessary or helpful regarding the hearing, appeal, and final
determination processes, and why?
Question 22: Does the proposed appeal process effectively protect
an applicant's due process rights, minimize regulatory burden, and meet
the requirements of the GENIUS Act? Are there any other possible
processes that the Board should consider using for appeals of denied
applications?
IV. Impact of Proposed Rule
The Board is proposing regulations to implement application
requirements and procedures for insured State member banks to request
approval for a subsidiary to issue payment stablecoins in accordance
with provisions of the GENIUS Act. The proposed rule would establish
application requirements and procedures to address the factors for
consideration as outlined in 12 U.S.C. 5904(c).
Baseline. This analysis considers a pre-GENIUS Act baseline. The
GENIUS Act provides regulatory clarity regarding the ability of insured
depository institutions to control a subsidiary that issues payment
stablecoins, and the regulatory framework that applies to such
subsidiaries.
Entities Affected. The proposed rule would apply to all insured
State member banks that seek approval for a subsidiary to issue payment
stablecoins. As of the quarter ending December 31, 2025, there were 703
insured State member banks.\79\ There is uncertainty regarding the
number of Board-supervised institutions that may seek approval for a
subsidiary to issue payment stablecoins in future periods and, thereby,
be directly affected by the proposed rule.
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\79\ Call Report Data, December 31, 2025.
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Benefits. The proposed rule provides clarity as to how the Board
will implement the GENIUS Act's application requirements and processes.
The proposed rule would, for example, provide transparency regarding
the types of information the Board will need to collect and review, as
well as how the Board will make determinations that an application is
``substantially complete,'' whether there has been a ``material
change,'' and how the Board would apply the statutory factors in
relation to the denial standard. This information will provide
increased certainty to insured State member banks considering whether
to apply to the Board to seek approval for a subsidiary to issue
payment stablecoins.
Costs. The compliance costs for the proposed rule are predominately
one-time paperwork costs, which are described in section V.B of this
Supplementary Information below on the Paperwork Reduction Act.
Generally, the Board expects the costs of complying with the proposed
rule to be relatively small in relation to the establishment and
operation of a subsidiary that issues payment stablecoins. To the
extent possible, the proposed rule would tailor and streamline the
application process and would use information already available to the
Board as the primary Federal regulator of the applicant, rather than
requiring duplicative information to be submitted as part of an
application. The Board believes that the application requirements as
proposed effectively balance the collection of information necessary to
address the factors for consideration established by the GENIUS Act
while containing burden on the applicant. Applicants that are approved
will incur ongoing compliance costs related to the regulatory framework
established under the GENIUS Act, but such costs will be considered in
rulemakings where such requirements are imposed.
Question 23: Would the proposed rule have any costs, benefits, or
other effects that the Board has not identified?
V. Administrative Law Matters
A. Solicitation of Comments and Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act \80\ requires the Federal
banking agencies to use plain language in all proposed and final rules
published after January 1, 2000. The Board has sought to present the
proposed rule in a simple and straightforward manner and invites
comment on the use of plain language. For example:
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\80\ Public Law 106-102, sec. 722, 113 Stat. 1338, 1471 (1999),
12 U.S.C. 4809.
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<bullet> Has the Board organized the material to suit your needs?
If not, how could they present the proposed rule more clearly?
<bullet> Are the requirements in the proposed rule clearly stated?
If not, how could the proposed rule be more clearly stated?
<bullet> Does the proposed regulation contain technical language or
jargon that is not clear? If so, which language requires clarification?
<bullet> Would a different format (grouping and order of sections,
use of headings, paragraphing) make the proposed regulation easier to
understand? If so, what changes would achieve that?
<bullet> Would more, but shorter, sections be better? If so, which
sections should be changed?
<bullet> What other changes can the Board incorporate to make the
proposed regulation easier to understand?
B. Paperwork Reduction Act
Certain provisions of the proposed rule contain ``collections of
[[Page 61355]]
information'' within the meaning of the Paperwork Reduction Act (PRA)
of 1995.\81\ In accordance with the requirements of the PRA, the Board
may not conduct or sponsor, and the respondent is not required to
respond to, an information collection unless it displays a currently
valid Office of Management and Budget (OMB) control number. The Board
has reviewed the proposed rule under authority delegated to the Board
by the OMB. The proposed rule contains a new information collection and
revisions to a current information collection subject to the PRA. To
implement these requirements, the Board would implement (1) the
Reporting Requirements Associated with Regulation UU (FR UU; OMB No.
7100-NEW); and (2) revise and extend for three years the Interagency
Notice of Change in Control, Interagency Notice of Change in Director
or Senior Executive Officer, and Interagency Biographical and Financial
Report (FR 2081a, b, and c; OMB No. 7100-0134).
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\81\ 44 U.S.C. 3501-3521.
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Comments are invited on:
(a) whether the collections of information are necessary for the
proper performance of the Board's functions, including whether the
information has practical utility;
(b) the accuracy of the estimates of the burden of the information
collections, including the validity of the methodology and assumptions
used;
(c) ways to enhance the quality, utility, and clarity of the
information to be collected;
(d) ways to minimize the burden of the information collection on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
(e) estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to provide information.
Comments on aspects of this document that may affect reporting,
recordkeeping, or disclosure requirements and burden estimates should
be sent to the addresses listed in the ADDRESSES section. A copy of the
comments may also be submitted to the OMB desk officer: By mail to U.S.
Office of Management and Budget, 725 17th Street NW, #10235,
Washington, DC 20503 or by facsimile to (202) 395-5806, Attention,
Federal Banking Agency Desk Officer.
Proposed Implementation of the Following Information Collection
Collection title: Reporting, Recordkeeping, and Disclosure
Requirements Associated with Regulation UU.
Collection identifier: FR UU.
OMB Number: 7100-NEW.
General description of collection: The FR UU collection comprises
the information requirements of the proposed Regulation UU that would
be found in 12 CFR part 247. This information would be used to carry
out the Board's responsibilities under the GENIUS Act, including (i) to
establish regulatory framework applicable to Board-supervised PPSIs,
including requirements related to reserves, capital, activities, and
risk management; (ii) to implement rules regarding State-qualified
PPSIs setting forth (a) the unusual and exigent circumstances in which
the Board may exercise its back-up enforcement authority with respect
to any State-qualified PPSI, and (b) the transition and waiver process
for covered PPSIs with an outstanding issuance value of more than $10
billion; (iii) to implement rules for Board-supervised entities seeking
to provide custodial services for reserves backing payment stablecoins
and certain other assets; (iv) to make certain changes to its rules for
banking organizations, including bank capital requirements and
activities rules, to facilitate banking organization participation in
payment stablecoin activities; and (v) to promulgate a framework
related to the GENIUS Act's prohibition on tying, which would apply to
all PPSIs (including PPSIs for which the Board is not the primary
regulator).
Reporting Requirements
The proposed rule and associated SUPPLEMENTARY INFORMATION include
provisions requiring applicants to submit certain information to the
Board as part of an application by letter. The information collection
requirements associated with the FR UU are event generated. The
application requirements collect information concerning proposed PPSI
subsidiaries. Under the proposed rule, an application must include a
business plan; financial information; relevant policies, procedures,
terms, and agreements; documentation relating to the capital structure
of the PPSI in certain circumstances; biographical reports; and
certifications regarding certain felony offenses of individuals
associated with the proposed Board-supervised PPSI.
The SUPPLEMENTARY INFORMATION to the proposed FR UU provides that
an applicant may request a waiver of the requirements of the GENIUS Act
under certain circumstances. The SUPPLEMENTARY INFORMATION to the
proposed FR UU states that the Board would invite an applicant to
submit, together with an application, a written request for a waiver
that explains the basis for the request, the extent of the
requirement(s) to be waived, and the time period requested, as well as
the applicant's plan for coming into compliance with the relevant
requirement(s) to be waived.
The proposed rule would also provide that, in the situation where
an application has been denied and an applicant wishes to appeal that
determination, an applicant must submit to the appropriate Federal
Reserve Bank information specifying the reasons why the Board should
reconsider its denial and provide supporting documentation necessary to
reconsider the Board's decision. The applicant would be permitted to
submit additional relevant information or documentation in advance of
or during the hearing and must explain why such information was not
provided prior to action on the application.
The information requested by the FR UU is necessary for the Board
to fulfill its responsibilities under the GENIUS Act and the proposed
Regulation UU to evaluate an application by an insured State member
bank that seeks approval for a subsidiary to issue payment stablecoins,
and to provide for a process for appealing of an initial determination
denying an application submitted pursuant to the GENIUS Act.
Frequency: Event-generated.
Respondents: Insured State member banks that seek approval for a
subsidiary to issue payment stablecoins.
Total estimated number of respondents:
Reporting
Sections 247.30(b) and (c)--5.
Sections 247.31(a) and (b)--1.
Estimated average hours per response:
Reporting
Sections 247.30(b) and (c)--80.
Sections 247.31(a) and (b)--5.
Total estimated annual burden hours: 405.
Total cost: $30,112.
Current actions: The proposed rule would establish procedures to be
followed by insured State member banks that seek to obtain Board
approval for a subsidiary to issue payment stablecoins pursuant to the
GENIUS Act. The Board is proposing to establish the information that is
to be submitted by an insured State member bank that seeks approval for
a subsidiary to issue payment stablecoins. The Board is also proposing
to establish the information that is to be submitted by an insured
State member bank that seeks to appeal an initial determination denying
an
[[Page 61356]]
application submitted pursuant to the GENIUS Act. Further, the Board is
proposing to establish the information that is to be submitted by an
insured State member bank that seeks to request a waiver of the
requirements of the GENIUS Act. The information collected by the FR UU
is necessary for the Board to fulfill its responsibilities under the
GENIUS Act and the proposed Regulation UU to evaluate an application by
an insured State member bank.
Methodology and assumptions: There is considerable uncertainty
regarding the number of firms that would engage in the activities or
make investments that would cause the firms to become subject to the
requirements of this proposed rule. The Board is not aware of any
method of determining the number of insured State member banks that
will seek approval for a subsidiary to issue payment stablecoins, given
that there are no such entities at this time and it is difficult to
predict how this market will develop. The Board considered the
estimates of the number of PPSI respondents in the notices of proposed
rulemaking issued by other Federal payment stablecoin regulators and
the number of insured State member banks compared to the number of
other IDIs. As a result, the Board assumes that five insured State
member banks would seek approval for a subsidiary to issue payment
stablecoins in the first few years after the finalization of the
proposed rule. The population of insured State member banks that will
seek approval for a subsidiary to issue payment stablecoins could be
higher or lower depending on market demand, strategic operational
choices of eligible institutions, and future developments in the
digital landscape. For reporting, recordkeeping, and disclosure
requirements that would apply to less than all such insured State
member banks applicants under the rule (such as requirements that
depend on actions or choices in the discretion of the insured State
member bank), the Board assumes that one such insured State member bank
would be subject to the requirement.
The burden hours estimated for each reporting, recordkeeping, or
disclosure requirement reflects the amount of time the Board estimates
will be expended by the relevant respondent to maintain, retain, or
disclose or provide information to the Board. Where possible, the
estimates were benchmarked against the estimates provided by other
agencies in their notices of proposed rulemaking implementing the
GENIUS Act and the estimates of burden for comparable or similar
requirements in other of the Board's information collections. The total
burden is calculated as the sum of the estimated average hours per
response multiplied by the number of respondents for each reporting,
recordkeeping, or disclosure requirement and frequency.
Total cost to the responding public is estimated using the
following formula: total burden hours, multiplied by the cost of
staffing, where the cost of staffing is calculated as a percent of time
for each occupational group multiplied by the group's hourly rate and
then summed (30% Office & Administrative Support at $25, 45% Financial
Managers at $90, 15% Lawyers at $89, and 10% Chief Executives at $130).
Hourly rates for each occupational group are the (rounded) mean hourly
wages from the Bureau of Labor Statistics (BLS).\82\ Occupations are
defined using the BLS Standard Occupational Classification System.\83\
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\82\ Occupational Employment and Wages, May 2025, published May
15, 2026, <a href="https://www.bls.gov/news.release/ocwage.t01.htm">https://www.bls.gov/news.release/ocwage.t01.htm</a>.
\83\ <a href="https://www.bls.gov/soc/">https://www.bls.gov/soc/</a>.
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Proposed Extension for Three Years, With Revision, of the Following
Information Collection
Collection title: Interagency Notice of Change in Control,
Interagency Notice of Change in Director or Senior Executive Officer,
and Interagency Biographical and Financial Report.
Collection identifier: FR 2081a, b, and c.
OMB control number: 7100-0134.
General description of collection: The FR 2081a must be submitted
in connection with the acquisition or, in certain circumstances, the
retention of control of a State member bank (SMB), savings and loan
holding company (SLHC), or bank holding company (BHC) (or group of BHCs
or SLHCs) by an individual, a group of individuals, a company, or a
group of companies that would not be BHCs or SLHCs after consummation
of the proposed transaction. The notice must be submitted to the
appropriate Federal Reserve Bank and include a description of the
proposed transaction, the purchase price and funding source, the
personal and financial information of the proposed acquirer(s), and any
proposed new management.
The FR 2081b is used, under certain circumstances, to notify the
appropriate Federal Reserve Bank of a proposed change to an
institution's board of directors or senior executive officers. The
notice must be filed if the institution is not in compliance with all
minimum capital requirements, is in troubled condition, or is otherwise
required by the Board to provide such notice. The reporting form may be
filed by the relevant SMB, SLHC, or BHC, or by the affected individual.
The FR 2081c is used by certain shareholders, directors, and
executive officers in connection with the FR 2081a, FR 2081b;
applications for BHC and SLHC formations, acquisitions, and mergers;
applications by insured State member banks that seek Board approval for
a subsidiary to issue payment stablecoins; and other filings.
Information requested on this reporting form is subject to verification
and requests for clarification or supplementation may be necessary. The
FR 2081c requests the following information: (1) certain biographical
information, such as personal information, employment records,
education and professional credentials, and business and banking
affiliations; (2) certain legal and related information; and (3) a
financial report on the notificant, including a balance sheet, a cash
flow statement, and various supporting schedules.
Frequency: Event-generated.
Respondents: SMBs, BHCs, SLHCs, and associated individuals.
Total estimated change in respondents: 15.
Total estimated number of respondents:
Reporting
FR 2081a--168.
FR 2081b--77.
FR 2081c--981.
Recordkeeping
FR 2081a--168.
Estimated average hours per response:
Reporting
FR 2081a--17.
FR 2081b--2.
FR 2081c--5.
Recordkeeping
FR 2081a--1.
Total estimated change in burden: 75.
Total estimated annual burden hours: 8,083.
Total cost: $600,971.
Proposed revisions: The Board is proposing to revise the scope of
the applications for which the FR 2081c is used by adding applications
by insured State member banks that seek Board approval for a subsidiary
to issue payment stablecoins, pursuant to Regulation UU. The
information collected by the FR 2081c is necessary for the Board to
fulfill its responsibilities under the GENIUS Act and the proposed
Regulation UU to evaluate an application by insured State member banks
that seek Board approval
[[Page 61357]]
for a subsidiary to issue payment stablecoins. The Board is not
proposing revisions to the FR 2081c instructions or reporting form at
this time.
There are no proposed revisions to the FR 2081a or FR 2081b.
C. Regulatory Flexibility Act
The Board is providing an initial regulatory flexibility analysis
(IRFA) with respect to this proposed rule. The Regulatory Flexibility
Act (RFA),\84\ requires an agency to consider the impact of its
proposed rules on small entities. Under regulations issued by the U.S.
Small Business Administration (SBA), a small entity includes a
depository institution, bank holding company, or savings and loan
holding company with total assets of $850 million or less. \85\ For
purposes of this section, any reference to ``small'' entities is a
reference to this definition.
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\84\ 5 U.S.C. 601 et seq.
\85\ See 13 CFR 121.201. Consistent with the SBA's General
Principles of Affiliation, the Board includes the assets of all
domestic and foreign affiliates toward the applicable size threshold
when determining whether to classify a particular entity as a small
entity. See 13 CFR 121.103.
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In connection with a proposed rule, the RFA requires an agency to
prepare an initial regulatory flexibility analysis describing the
impact of the rule on small entities, unless the head of the agency
certifies that the proposed rule, if promulgated, will not have a
significant economic impact on a substantial number of small entities
and publishes such certification along with a statement providing the
factual basis for such certification in the Federal Register. An IRFA
must contain: (1) a description of the reasons why action by the agency
is being considered; (2) a succinct statement of the objectives of, and
legal basis for, the proposed rule; (3) a description of and, where
feasible, an estimate of the number of small entities to which the
proposed rule will apply; (4) a description of the projected reporting,
recordkeeping, and other compliance requirements of the proposed rule,
including an estimate of the classes of small entities that will be
subject to the requirement and the type of professional skills
necessary for preparation of the report or record; (5) an
identification, to the extent practicable, of all relevant Federal
rules which may duplicate, overlap with, or conflict with the proposed
rule; and (6) a description of any significant alternatives to the
proposed rule which accomplish its stated objectives and minimize any
significant economic impact of the proposed rule on small entities.\86\
---------------------------------------------------------------------------
\86\ 5 U.S.C. 603(b)-(c).
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The Board has considered the potential impact of the proposed rule
on small entities in accordance with the RFA. Based on its analysis and
for the reasons stated below, the proposal is not expected to have a
significant economic impact on a substantial number of small entities.
Nevertheless, the Board is publishing and inviting comment on this
IRFA.
1. Reasons Why Action Is Being Considered by the Board
The GENIUS Act was enacted in July 2025 to provide a framework for
the regulation of payment stablecoins. The Act requires the Board to
promulgate rules for processing applications from insured State member
banks that seek approval for a subsidiary to issue payment
stablecoins.\87\ The GENIUS Act's effective date is the earlier of 18
months after the enactment date of July 18, 2025, or 120 days after the
primary Federal payment stablecoin regulators issue any final
regulations implementing the Act.
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\87\ 12 U.S.C. 5904(a)(2)(A).
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2. The Objectives of, and Legal Basis for, the Proposed Rule
The proposed rule would set out a process for insured State member
banks to apply to the Board for prior approval for a subsidiary to
issue payment stablecoins using the applications process and
requirements set out in the GENIUS Act. The proposed rule would: (i)
describe the scope of the application requirements; (ii) set out rules
of procedure governing such applications; (iii) specify the information
that applicants must submit; and (iv) establish a process governing the
appeal, hearings, and final determination for applications. As required
by statute, the proposal would establish a tailored application process
that prioritizes the safety and soundness of the applicant, including
its proposed Board-supervised PPSI subsidiary.\88\
---------------------------------------------------------------------------
\88\ 12 U.S.C. 5904(a)(1).
---------------------------------------------------------------------------
3. Description of the Compliance Requirements of the Proposal and
Estimate of the Number of Small Entities
As previously discussed, the proposed rule would apply to all
insured State member banks that seek approval for a subsidiary to issue
payment stablecoins. As of December 31, 2025, there were 703 insured
State member banks.\89\ Of those institutions, 439 are considered
``small'' for the purposes of RFA.\90\
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\89\ Call Report Data, December 31, 2025.
\90\ Call Report Data, December 31, 2025.
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The Board recognizes considerable uncertainty regarding the number
of firms that would engage in activities or make investments that would
subject the firms to the requirements of this proposed rule. For this
analysis, the Board estimates that between 5 and 10 insured State
member banks may seek approval for a subsidiary to issue payment
stablecoins. Given the early stages of the payment stablecoin market,
this range accounts for uncertainty regarding the volume of future
participants. The population of insured State member banks seeking such
approval could be higher or lower depending on market demand, strategic
operational choices of eligible institutions, and future developments
in the digital landscape. By utilizing this range, the Board aims to
establish an estimate that serves as the basis for evaluating the
economic effects of the proposed rule, while acknowledging the inherent
uncertainty resulting from a lack of historical precedent.
The Board expects that insured State member banks that are most
likely to seek to form a Board-supervised PPSI subsidiary initially
will be larger institutions with the compliance infrastructure and
capital necessary to support payment stablecoin issuance. As such, the
Board anticipates that most, if not all, insured State member banks
seeking approval for a subsidiary to issue payment stablecoins would
not be small entities as defined by the SBA. Even assuming the unlikely
scenario that all, i.e., the upper-bound number of 10 insured State
member banks, would be small and that all 10 insured State member banks
would be significantly impacted by the proposed rule, these impacted
entities would comprise a very small percentage of small insured State
member banks.
Applicants would expend 80 labor hours each to comply with the
proposed application requirements. The proposed rule would result in
application compliance costs of $5,772 per small, Board-supervised
institution, or $28,860 in aggregate, on average.\91\
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\91\ Total cost to the responding public is estimated using the
following formula: total burden hours, multiplied by the cost of
staffing, where the cost of staffing is calculated as a percent of
time for each occupational group multiplied by the group's hourly
rate and then summed (30% Office & Administrative Support at $24,
45% Financial Managers at $87, 15% Lawyers at $88, and 10% Chief
Executives at $126). Hourly rates for each occupational group are
the (rounded) mean hourly wages from the BLS, Occupational
Employment and Wages, May 2024, published April 2, 2025, <a href="https://www.bls.gov/news.release/ocwage.t01.htm">https://www.bls.gov/news.release/ocwage.t01.htm</a>. Occupations are defined
using the BLS Standard Occupational Classification System, <a href="https://www.bls.gov/soc/">https://www.bls.gov/soc/</a>.
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[[Page 61358]]
4. Consideration of Duplicative, Overlapping, or Conflicting Rules and
Significant Alternatives to the Proposal
The Board is aware of no other Federal rules that duplicate,
overlap, or conflict with the proposal. While other Federal and State
regulators are required to adopt similar rules, each set of rules would
apply to a different and defined scope of institutions. The GENIUS Act
requires the Board to issue the rules described above.\92\ The Board is
seeking comment on certain potential alternative approaches to discrete
aspects of the final rule, as discussed elsewhere in this Supplementary
Information, that would not significantly change the estimated economic
impact of the proposed rule.
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\92\ 12 U.S.C. 5904(a)(2)(A); see also 5 U.S.C. 552(a)(1).
---------------------------------------------------------------------------
5. Conclusion
Based on its analysis and for the reasons stated above, the Board
believes that the proposed rule is unlikely to have a significant
economic impact on substantial number of small entities. The Board
welcomes comment on all aspects of its analysis. In particular, the
Board requests that commenters describe the nature of any impact on
small entities and provide empirical data to illustrate and support the
extent of the impact. Additionally, the Board requests that commenters
describe the number of small entities under the RFA and the impact on
small entities.
D. Riegle Community Development and Regulatory Improvement Act of 1994
Pursuant to section 302(a) of the Riegle Community Development and
Regulatory Improvement Act of 1994 (RCDRIA),\93\ in determining the
effective date and administrative compliance requirements for new
regulations that impose additional reporting, disclosure, or other
requirements on insured depository institutions,\94\ each Federal
banking agency must consider, consistent with principles of safety and
soundness and the public interest, any administrative burdens that such
regulations would place on affected depository institutions, including
small depository institutions, and customers of depository
institutions, as well as the benefits of such regulations. In addition,
section 302(b) of the RCDRIA requires new regulations and amendments to
regulations that impose additional reporting, disclosures, or other new
requirements on insured depository institutions generally to take
effect on the first day of a calendar quarter that begins on or after
the date on which the regulations are published in final form. The
Board invites comments that further will inform its consideration of
the RCDRIA.\95\
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\93\ 12 U.S.C. 4802(a).
\94\ For purposes of this analysis and consistent with RCDRIA,
``insured depository institution'' refers to the definition for that
term used in section 3 of the FDI Act.
\95\ 12 U.S.C. 4802(b).
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E. Providing Accountability Through Transparency Act of 2023
The Providing Accountability Through Transparency Act of 2023 (5
U.S.C. 553(b)(4)) requires that a notice of proposed rulemaking include
the internet address of a summary of not more than 100 words in length
of the proposed rule, in plain language, that shall be posted on the
internet website under section 206(d) of the E-Government Act of 2002
(44 U.S.C. 3501 note).
In summary, the Board of Governors of the Federal Reserve System
(Board) proposes to issue regulations that would establish procedures
to be followed by an insured State member bank that seeks to obtain
Board approval for a subsidiary to issue payment stablecoins pursuant
to the Guiding and Establishing National Innovation for U.S.
Stablecoins Act (GENIUS Act).
The proposal and such a summary can be found at <a href="https://www.regulations.gov">https://www.regulations.gov</a> and <a href="https://www.federalreserve.gov/apps/proposals/">https://www.federalreserve.gov/apps/proposals/</a>.
List of Subjects
12 CFR Part 247
Administrative practice and procedure; Banks, banking; Federal
Reserve System; Stablecoins, Stablecoin Issuers
12 CFR Part 262
Administrative practice and procedure; Banks, banking; Federal
Reserve System.
PART 247--STABLECOINS (REGULATION UU)
0
1. The authority citation for part 247 reads as follows:
Authority: 12 U.S.C. 12 U.S.C. 248, 321-339a, 483, 602, 1818,
1828, 1831o, 1831p-1, and 5901 et seq.
0
2. Add Subpart A, consisting of Sec. Sec. 247.1 through 247.9.
0
3. In Subpart A:
0
a. Add Sec. Sec. 247.1 through 247.2 to read as follows; and
0
b. Reserve Sec. Sec. 247.3 through 247.9.
Subpart A--Authority, Purpose, Scope, and Definitions
Sec. 247.1 Authority, purpose, and scope.
(a) Authority. This part is issued pursuant to the Guiding and
Establishing National Innovation for U.S. Stablecoins (GENIUS) Act (12
U.S.C. 5901 et seq.).
(b) Purpose and scope. This part implements certain provisions of
the GENIUS Act (12 U.S.C. 5901 et seq.). Subpart D implements section 5
of the GENIUS Act, which requires the Board to establish applications
procedures applicable to insured State member banks seeking approval
for a subsidiary to issue payment stablecoins.
Sec. 247.2 Definitions.
As used in this part:
Affiliate means a person that controls, is controlled by, or is
under common control with another person.
Applicant means an insured State member bank that has submitted an
application for a subsidiary to issue payment stablecoins pursuant to
section 5 of the GENIUS Act and section 30 of this part.
Bank Secrecy Act means:
(1) section 21 of the Federal Deposit Insurance Act (12 U.S.C.
1829b);
(2) chapter 2 of title I of Public Law 91-508 (12 U.S.C. 1951 et
seq.); and
(3) subchapter II of chapter 53 of title 31, United States Code and
notes thereto (31 U.S.C. 5311 et seq.).
Board means the Board of Governors of the Federal Reserve System.
Board of directors means an entity's board of directors or the
group of individuals that serve the nearest equivalent function of
acting as the governing body of an entity.
Board-supervised PPSI means a permitted payment stablecoin issuer
supervised and regulated by the Board pursuant to the GENIUS Act (12
U.S.C. 5901 et seq.).
Control. A person controls another person if:
(1) the person directly or indirectly or acting through one or more
other persons owns, controls, or has power to vote 25 percent or more
of any class of voting securities of the other person;
(2) the person controls in any manner the election of a majority of
the directors or trustees of the other person; or
(3) the Board determines, after notice and opportunity for hearing,
that the person directly or indirectly exercises a controlling
influence over the management or policies of the other person.
Deposit means ``deposit'' as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813(l)).
[[Page 61359]]
Director means an individual who serves on the board of directors
of an entity, except an advisory director who:
(1) is not elected by the shareholders of the entity;
(2) does not have the authority to vote on matters before the board
of directors or any committee of the board of directors; and
(3) provides solely general policy advice to the board of directors
or any committee.
Immediate family means the spouse of an individual, the
individual's minor children, and any of the individual's children
(including adults) having their domicile in the individual's home.
Insured State member bank means a State member bank, the deposits
of which are insured by the FDIC.
Officer means the president, chairman, chief executive officer,
chief operating officer, chief financial officer, chief investment
officer, chief risk officer, chief technology officer, and Bank Secrecy
Act officer. The term includes any individual serving in the functional
capacity of the listed titles or their equivalent, without regard to
title, salary, or compensation. The term also includes any other person
identified by the Board or appropriate Federal Reserve Bank, whether or
not hired as an employee, with significant influence over, or who
participates in, major policymaking decisions of the entity.
Payment stablecoin has the same meaning as in section 2(22) of the
GENIUS Act (12 U.S.C. 5901(22)).
Permitted payment stablecoin issuer or PPSI has the same meaning as
in section 2(23) of the GENIUS Act (12 U.S.C. 5901(23)).
Person has the same meaning as in section 2(24) of the GENIUS Act
(12 U.S.C. 5901(24)).
Principal shareholder means a person who directly or indirectly or
acting in concert with one or more persons, or together with members of
their immediate family, will own, control, or hold the power to vote 10
percent or more of any class of voting securities of an entity, or any
person that the Board determines has the power, directly or indirectly,
to exercise a controlling influence over the management or policies of
an entity.
State has the same meaning as in section 2(28) of the GENIUS Act
(12 U.S.C. 5901(28)).
State member bank means a State-chartered bank that has been
approved for membership in the Federal Reserve System.
Subsidiary has the same meaning as in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813(w)(4)).
Voting securities has the same meaning as in 12 CFR 225.2.
0
3. Add and reserve Subpart B, consisting of Sec. Sec. 247.10 through
247.19.
0
4. Add and reserve Subpart C, consisting of Sec. Sec. 247.20 through
247.29.
0
5. Add Subpart D, consisting of Sec. Sec. 247.30 through 247.39.
0
6. In Subpart D:
0
a. Add Sec. Sec. 247.30 through 247.31 to read as follows; and
0
b. Reserve Sec. Sec. 247.32 through 247.39.
Subpart D--Applications by Insured State Member Banks for a
Subsidiary to Issue Payment Stablecoins
Sec. 247.30 Applications by insured State member banks.
(a) Transactions requiring Board approval. An insured State member
bank must receive the prior written approval of the Board for a PPSI
subsidiary to issue payment stablecoins pursuant to 12 U.S.C. 5901 et
seq.
(b) Applications.--(1) In general. An application for the Board's
prior approval under 12 U.S.C. 5904 shall be governed by the provisions
of this section. The application must be submitted in the form of a
letter, together with enclosures and a table of contents for all
materials, and shall be filed with the appropriate Federal Reserve
Bank. The Federal Reserve Bank shall promptly send a copy of the
application to the Board.
(2) Contents of application. An application submitted under 12
U.S.C. 5904 and this section must be signed by a duly authorized agent
of the applicant. The application must describe the proposal, including
all relevant facts, and the action requested. The application must
indicate the reasons why the application should be approved, addressing
the factors set out in 12 U.S.C. 5904(c) and paragraph (d) of this
section. The application must include, at a minimum, the following
information:
(i) Business Plan. A proposed business plan that includes
descriptions of (A) the proposed business model, including the proposed
products, services, and activities of the proposed Board-supervised
PPSI, and the legal basis under applicable Federal and State law for
each proposed activity; (B) contemplated affiliate transactions and
relationships, including a description of how the proposed Board-
supervised PPSI would be controlled by the applicant; (C) the proposed
organizational and governance structure; (D) any material third-party
relationships; (E) identities, roles, and responsibilities of all
entities involved in the proposed related activities; and (F) how the
proposed Board-supervised PPSI would maintain compliance with the key
requirements of 12 U.S.C. 5901 et seq. and this part.
(ii) Financial Information. Financial information relevant to the
proposed Board-supervised PPSI, including (A) a description of how the
issuer would be funded initially and on an ongoing basis, including
whether it is anticipated that an applicant or any individual would
make a financial guarantee or otherwise act to financially support the
proposed Board-supervised PPSI (including any related intercompany
agreements); (B) projected stablecoin reserve assets and their
composition; (C) reserve management plans; and (D) financial
projections, with accompanying assumptions, for the first three years
of operations for the proposed Board-supervised PPSI.
(iii) Policies and Procedures. Any relevant policies and
procedures; customer agreements, terms of use, or other disclosures
provided to customers; agreements with affiliates or third parties; or
other information that would be necessary for evaluating the
application, including those relating to (A) redemption; (B)
maintenance of required reserve assets; (C) custody of customer assets;
(D) recordkeeping, reconciliation, and transaction processing; and (E)
compliance with Bank Secrecy Act, sanctions compliance program, anti-
money laundering, and countering the financing of terrorism
requirements.
(iv) Capital Structure. If the proposed Board-supervised PPSI is
not wholly owned by the applicant, documentation regarding the capital
structure of the proposed Board-supervised PPSI, including the shares
of each class of securities and total equity controlled by each
shareholder on a fully diluted and undiluted basis, general background
information for each shareholder controlling more than five percent of
voting securities, and the organizational documents and other
agreements governing the securities of the proposed Board-supervised
PPSI.
(3) Biographical report.--(i) Any principal shareholder other than
the applicant, as well as the top two decision-makers of the proposed
Board-supervised PPSI, must submit the Biographical Report and
Certification sections of the Interagency Biographical and Financial
Report--FR 2081c and biometric information for background checks. An
applicant may identify the top two decision-makers of the proposed
Board-supervised PPSI; however, the Board reserves the right to
determine that other persons are the top two decision-makers.
[[Page 61360]]
(ii) The Board may, in its discretion, seek additional biographical
or personal financial information with respect to officers, directors,
and principal shareholders of a PPSI, its subsidiaries, or its parent
companies as necessary to evaluate the factors described in 12 U.S.C.
5904(c) and paragraph (d) of this section.
(iii) The Board may, in its discretion, waive the requirement in
paragraph (b)(3)(i) of this section.
(4) Certifications.
(i) All officers and directors of the proposed Board-supervised
PPSI must submit a certification that they have not been convicted of a
felony offense involving insider trading, embezzlement, cybercrime,
money laundering, financing of terrorism, or financial fraud.
(ii) An authorized representative of the applicant must certify in
writing that the filing submitted to the Board, including any
supporting materials, contains no material misrepresentation or
omissions. The Board may review and verify any information filed in
connection with a notice or an application. Any person responsible for
any material misrepresentation or omission in a filing or supporting
materials may be subject to enforcement action and other penalties,
including criminal penalties provided in 18 U.S.C. 1001.
(5) Additional Information. The Board may, at any time, request
additional information that the Board, in its sole discretion, deems
necessary for evaluating the factors the Board must consider under 12
U.S.C. 5904(c) and paragraph (d) of this section.
(c) Completeness.--(1) In general. For purposes of this section, an
application shall be considered substantially complete if the
application contains sufficient information for the Board to render a
decision on whether the applicant satisfies the factors described in 12
U.S.C. 5904(c) and paragraph (d) of this section. An application would
not be considered substantially complete if the applicant has omitted
any information necessary for evaluating the factors the Board must
consider under 12 U.S.C. 5904(c) and paragraph (d) of this section.
(2) Material change. An application considered substantially
complete remains substantially complete unless there is a material
change in circumstances that requires the Board to treat the
application as a new application. An application that has been
considered substantially complete may be considered to be no longer be
substantially complete if the Board becomes aware that, due to a
material change in circumstances, the information received is no longer
sufficient for the Board to evaluate all factors that the Board must
consider under 12 U.S.C. 5904(c) and paragraph (d) of this section.
(3) Notification. Not later than 30 days after the appropriate
Federal Reserve Bank receives an application under this section, the
Board shall notify the applicant as to whether the Board considers the
application to be substantially complete. If the Board does not believe
the application is substantially complete, the Board will specify the
additional information the applicant must provide in order for the
application to be considered substantially complete.
(4) Date of receipt. For purposes of this section, information
submitted within business hours on a business day in the time zone of
the appropriate Federal Reserve Bank will be deemed to have been
received by the appropriate Federal Reserve Bank on that day.
Information submitted on a non-business day or outside business hours
would be deemed to be received on the next business day.
(d) Factors to be considered. The Board shall consider the
following factors when evaluating an application under subsection (a):
(1) The ability of the proposed Board-supervised PPSI, based on
financial condition and resources, to meet the requirements set forth
under 12 U.S.C. 5903.
(i) Until such time as final capital requirements pertaining to
Board-supervised PPSIs become effective, an applicant must demonstrate
that the proposed Board-supervised PPSI would have sufficient initial
capital, net of any organizational expenses that would be charged to
the proposed Board-supervised PPSI's capital after it begins
operations, to support its projected volume and type of business as
outlined in its business plan.
(2) Whether an individual who has been convicted of a felony
offense involving insider trading, embezzlement, cybercrime, money
laundering, financing of terrorism, or financial fraud is serving as an
officer or director of the proposed Board-supervised PPSI.
(3) The competence, experience, and integrity of the officers,
directors, and principal shareholders of the proposed Board-supervised
PPSI, its subsidiaries, and parent companies of the applicant,
including--
(i) the record of those officers, directors, and principal
shareholders of compliance with laws and regulations; and
(ii) the ability of those officers, directors, and principal
shareholders to fulfill any commitments to, and any conditions imposed
by, the Board in connection with the application at hand and any prior
applications.
(4) whether the redemption policy of the proposed Board-supervised
PPSI of the applicant meet the standards under 12 U.S.C. 5903(a)(1)(B).
(e) Timing for decision.--(1) Not later than 120 days after
receiving a substantially complete application under this section, the
Board shall render a decision on the application.
(2) If the Board fails to render a decision on a complete
application within the time period specified in paragraph (e)(1) of
this section, the application shall be deemed approved.
(f) Denial.--(1) Grounds for denial. The Board shall only deny a
substantially complete application received under this section if the
Board determines that the activities of the applicant, including the
activities of the proposed Board-supervised PPSI, would be unsafe or
unsound based on the factors described in 12 U.S.C. 5904(c) and
paragraph (d) of this section. Inconsistency with any one of the
factors in 12 U.S.C. 5904(c) or paragraph (d) of this section may be
sufficient to warrant denial to the extent that the activities of the
applicant, including the activities of the proposed Board-supervised
PPSI, would be unsafe or unsound.
(2) Explanation. If the Board denies a complete application
received under this section, not later than 30 days after the date of
such denial, the Board shall provide the applicant with written notice
explaining the denial with specificity, including all findings made by
the Board with respect to all identified material shortcomings in the
application, including actionable recommendations on how the applicant
could address the identified material shortcomings.
(g) Conditional approvals. The Board may impose conditions on any
approval, including conditions to address financial, managerial, safety
and soundness, compliance or other concerns, to ensure that approval is
consistent with the relevant statutory factors and other provisions of
the GENIUS Act.
(h) Reservation of authority. The Board may, in exceptional
circumstances and to the extent consistent with the GENIUS Act, waive
the requirements in this section or adopt different procedures.
* * * * *
[[Page 61361]]
Sec. 247.31 Opportunity for Hearing and Final Determination
(a) Request for hearing. Not later than 30 days after the date on
which the applicant receives a notice denying an application under
Sec. 247.30(f), the applicant may submit a written request to the
appropriate Federal Reserve Bank, requesting an opportunity for a
written or oral hearing before the Board to appeal the denial. The
written request must specify the reasons why the Board should
reconsider its denial, addressing the factors the Board may consider
under paragraph (c) of this section, and provide any supporting
documentation.
(b) Timing.--(1) Generally. Upon receipt of a timely request under
paragraph (a) of this section, the Board shall notice a time, not later
than 30 days after the Board receives the request, and place at which
the applicant may appear, personally or through counsel, to submit
written materials or provide oral testimony and oral argument.
(2) Deadline to submit information. The applicant must submit all
written materials, arguments, and relevant documentation to the
appropriate Federal Reserve Bank on or before the time of the hearing.
To the extent the applicant provides new information, the applicant
must explain why such information was not provided prior to the date of
action on the application. The Board may, in its discretion, consider
any written materials, arguments, or relevant documentation submitted
after the time of the hearing.
(c) Standard for approval of application. The Board may approve an
application that was denied under Sec. 247.30(f)--
(1) if an applicant presents relevant facts that, for good cause
shown, were not previously presented to the Board, and that, based on
such new information, the application is consistent with approval under
the statutory factors; or
(2) for any other reason the Board determines justifies relief.
(d) Final determination.--(1) Notice after oral or written hearing.
Not later than 60 days after the time of the hearing under this
section, the Board shall notify the applicant of a final determination,
which shall contain a statement of the basis for that determination,
with specific findings.
(2) Notice if no hearing. If an applicant does not make a timely
request for a hearing under paragraph (a) of this section, the Board
shall notify the applicant, not later than 10 days after the date by
which the applicant may request a hearing under paragraph (a), in
writing, that the denial of the application is a final determination of
the Board.
(e) Right to reapply. The denial of an application shall not
prohibit an applicant from filing a subsequent application.
* * * * *
PART 262--RULES OF PROCEDURE
0
7. The authority citation for part 262 continues to read as follows:
Authority: 5 U.S.C. 552; 12 U.S.C. 248, 321, 325, 326, 483, 602,
611a, 625, 1467a, 1828(c), 1842, 1844, 1850a, 1867, 3105, 3106,
3108, 5361, 5368, 5467, 5469, and 5904.
0
7. In Sec. 262.3, add paragraph (m) to read as follows:
Sec. 262.3 Applications.
* * * * *
(m) This section does not apply to applications by an insured State
member bank for a subsidiary to issue payment stablecoins. For special
rules governing procedures for applications by a State member bank
seeking to establish or acquire control of a payment stablecoin issuer
pursuant to 12 U.S.C. 5901 et seq., refer instead to Sec. Sec. 247.30
and 247.31 of this title.
* * * * *
By order of the Board of Governors of the Federal Reserve
System.
Michele Taylor Fennell,
Associate Secretary of the Board.
[FR Doc. 2026-19899 Filed 9-28-26; 8:45 am]
BILLING CODE 6210-01-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.