Treasury to Require Major Stablecoin Issuers to Hold Reserves at Federal Reserve Banks

Treasury Draft Would Mandate Federal Reserve Custody for Major Stablecoins

The Treasury Department plans to propose a rule requiring the largest U.S. dollar stablecoin issuers to hold customer reserves directly at Federal Reserve banks, according to two Treasury officials familiar with the rulemaking. The 47-page draft, circulated internally on Feb. 5 and set for publication in the Federal Register on Feb. 11, would impose the first federal custody mandate on the $175 billion stablecoin market.

The proposal would apply to any issuer with more than $10 billion in circulating tokens, the officials said. Under the draft, those firms would be required to maintain at least 100 percent of reserve assets in segregated accounts at regional Federal Reserve banks rather than in commercial bank deposits or money-market funds. The rule would take effect 180 days after finalization, with a 60-day public comment period beginning upon publication.

A lobbyist briefed on the draft said the rule emerged from a Feb. 5 meeting at Treasury headquarters that included staff from the Office of the Comptroller of the Currency, the Federal Reserve Board, and the Financial Crimes Enforcement Network. The meeting began at 2:30 p.m. and lasted roughly 90 minutes, the lobbyist said. Officials presented the draft as a way to reduce run risk and give federal regulators direct visibility into stablecoin reserve flows.

The rule would primarily affect Circle Internet Financial, issuer of USDC, and Tether Holdings, issuer of USDT, though foreign-issued tokens traded on U.S. exchanges could also fall under the requirements, the officials said. Combined, those two issuers account for roughly $160 billion in circulating stablecoins. Smaller issuers below the $10 billion threshold would face lighter reserve requirements but could opt into the Fed custody program.

Fed Pilot Program Would Build Custody Infrastructure

The Treasury plan is paired with a Federal Reserve pilot program that would allow select reserve banks to open custody accounts for stablecoin issuers, according to a bank compliance officer familiar with the rulemaking. The pilot would begin March 1 at the Federal Reserve Banks of New York, Chicago, and Dallas, the officer said, with JPMorgan Chase and BNY Mellon serving as operational intermediaries for token issuance and redemption.

The pilot would run for 12 months, after which the Fed would decide whether to expand the program nationally, the compliance officer said. Issuers would pay fees tied to account balances and transaction volumes, with initial pricing set at 12 basis points annually on held reserves. The officer said the fee structure was modeled on existing Treasury securities custody accounts maintained by the Fed.

Industry groups have already begun mobilizing against the proposal. A Chamber of Digital Commerce representative told members on a Feb. 6 call that the rule would impose significant operational constraints, according to one participant on the call. The group is preparing a public comment letter and considering a request for an extended 90-day comment period.

A separate banking trade group, the Bank Policy Institute, raised concerns during a Feb. 4 briefing that the rule could disintermediate commercial banks from stablecoin custody revenue, two people who attended the briefing said. The group estimates that banks currently earn between $400 million and $600 million annually from stablecoin reserve deposits and related services. The briefing included representatives from State Street, Citigroup, and Wells Fargo, one attendee said.

The compliance officer said banks are particularly worried about a provision requiring them to certify reserve holdings on a weekly basis rather than monthly. The change would require upgrades to core custody systems and could delay product launches planned for the second quarter of 2026.

Sanctions and Surveillance Concerns Drive Rulemaking

The rulemaking is being driven in part by concerns over sanctions evasion and illicit finance, the Treasury officials said. By placing reserves inside the Federal Reserve system, regulators would gain real-time data on stablecoin issuance and redemption flows, including cross-border transactions that currently move outside traditional banking rails.

Treasury's Office of Terrorism and Financial Intelligence has pressed for the custody requirement since late 2025, following reports that Russian and Iranian actors used dollar-backed stablecoins to settle transactions after being cut off from correspondent banking, one official said. The draft includes a provision requiring issuers to report suspicious wallet addresses and transaction patterns to FinCEN within 24 hours.

The proposal also arrives as Congress remains deadlocked on comprehensive stablecoin legislation. The House Financial Services Committee held a hearing on Jan. 28 but did not schedule a markup. Senate Banking Committee staff have told lobbyists that a legislative package is unlikely before April, the lobbyist briefed on the draft said.

State regulators have also been caught off guard. A spokesperson for the New York Department of Financial Services declined to comment, but two state regulatory officials said they learned of the federal proposal on Feb. 6 and were reviewing whether it would preempt New York's existing BitLicense and trust company rules for stablecoin issuers.

Watch for the Federal Register notice on Feb. 11, along with a Treasury fact sheet and a joint statement from the Fed and OCC. Circle and Tether are expected to issue public responses within 48 hours of publication. The House Financial Services Committee has scheduled a follow-up hearing for Feb. 18, according to a committee aide.