Fed proposes two-day redemption rule for stablecoins

TLDR

The Federal Reserve has put forward a draft rule that caps redemption times for certain regulated stablecoins at two business days.

1. The proposal would require payment stablecoin issuers under Fed supervision to honor redemption requests within two business days and to publish clear redemption procedures.
2. The rule is a ceiling, not a target, and would mainly affect bank-style, Fed-supervised issuers, leaving many offshore and exchange-held stablecoin balances outside its direct scope.
3. The measure is open for public comment and could change; key questions are which issuers fall under it, what reserves they must hold, and how it will work in stress events.

Deep Dive

1. What The Fed Is Proposing

According to a recent Fed-focused explainer, the central bank has proposed a rule that would require payment stablecoin issuers it directly supervises to process customer redemption requests within two business days, turning informal norms into a binding ceiling on delays for in-scope issuers. The same draft framework would also require issuers to spell out clear redemption procedures, including who can redeem, how requests are submitted, and how often redemptions are processed, and to accept at least one redemption request from eligible customers who pass required checks.

Reports note that the two-day limit is a maximum, not an average, so issuers can and likely will redeem faster in normal conditions, while limited exceptions exist for financial stability concerns or legally required checks. The proposal sits within a broader Fed effort, under the GENIUS Act, to build full-reserve, capital and operational rules for payment stablecoins, with details still subject to change during the comment process.

2. How It Could Affect Users And Issuers

Coverage of the proposal highlights that it only applies to payment stablecoin issuers under direct Federal Reserve supervision, not to all dollar stablecoins on the market. At least $76 billion in reserve-backed dollar stablecoins sit on centralized exchanges, with roughly $61.5 billion in USDT and $10.1 billion in USDC in identified exchange wallets, but these balances are subject to each venues withdrawal terms rather than directly to Fed rules.

For issuers that do come under Fed oversight, a two-day cap effectively forces them to hold highly liquid reserves and robust operational processes, especially if redemptions spike during stress. That likely means a bias toward short-term US Treasury bills and cash-like instruments, reinforcing the trend of stablecoin issuers becoming meaningful buyers of short-dated government debt.

3. What To Watch Next

The rule is currently a proposal, with an open public comment period and no final effective date. Observers are watching three main moving parts:

1. Scope, that is, whether only Fed-supervised banks can issue in-scope stablecoins or whether other federally chartered entities are eventually included.
2. Reserve and capital rules, including how strictly issuers must match liabilities with liquid assets and how much capital they must hold for business and operational risks.
3. Stress handling, such as how the two-day redemption cap is applied during market turmoil, and how exceptions for financial stability or compliance delays are used.

Conclusion

The Feds proposed two-day redemption rule signals that regulators want timely, predictable cash-outs to be a core feature of regulated payment stablecoins, not just an aspiration. If adopted, it would push bank-style issuers toward very liquid reserves and tightly run operations, potentially giving their tokens a trust premium over lightly regulated alternatives, while still leaving much of todays stablecoin ecosystem outside direct Fed control.