Fed proposed stablecoin rule could trigger a 48-hour liquidation run
The Federal Reserve proposed rules requiring supervised payment stablecoin issuers to notify it within 24 hours if reserves fall below outstanding tokens and submit a recovery plan. Unless the shortfall is fixed or the Fed directs otherwise, issuers must begin liquidating reserves and redeeming tokens by 5 p.m. the next business day. Issuers may continue minting during this window, partly to avoid an on-chain signal that could accelerate a run; minting stops once liquidation begins. The proposal also requires daily reserve valuation and redemption within two business days under normal conditions. The Fed is seeking comment on whether issuance should instead stop immediately after a breach. Its approach differs from an OCC proposal that would halt net issuance at once and defer mandatory liquidation until a shortfall lasts 15 business days. The rules reflect lessons from USDC’s 2023 depeg and the risk that redemption surges can outpace access to reserves and market liquidity.
