A Federal Reserve proposal published in the Federal Register would require stablecoin issuers under the Fed’s direct supervision to pay out redemptions within two business days of a valid request. But researchers point to a gap the proposal does not touch: the $76 billion in stablecoins sitting directly on centralized exchanges, where users have no claim on the Fed’s clock.
The draft rule is the second of two packages the Fed circulated under the GENIUS Act, the stablecoin law passed in July. The first covered who can issue and what counts as a payment stablecoin. This one sets the operational plumbing: redemption timelines, monthly audited reserve reporting with executive certifications, standardized capital requirements, and an anti-tying prohibition covering the banks behind issuers.
What the clock covers
Under proposed section 247.12, a supervised issuer would have to complete a redemption request within two business days of a customer’s request, with disclosures, onboarding checks and stated exceptions. The proposal text was announced September 24 and published September 29, opening a comment period. Issuers would also have to publish their redemption procedure up front, so users know in advance how fast their money moves and what could slow it down.
That is a real change from today’s market. Tether, the largest issuer, discloses no binding redemption deadline, while USDC commits to same or next business day processing for qualified customers. Under the rule, both would fall under a single ceiling in principle, though the proposal binds only issuers the Board supervises, not every token claiming to be a dollar. Offshore issuers remain outside the clock unless they obtain US supervision or partner with a supervised entity.
The $76 billion gap
The wrinkle researchers keep raising is where users actually hold stablecoins. The Andersen Institute put out a snapshot from July 28: of the $269.4 billion across the 12 largest reserve backed dollar tokens, $76 billion, or 28.2 percent, sat directly on centralized exchanges. An exchange customer with a frozen balance or a collapsed venue has claims against the exchange first, never reaching the issuer’s redemption desk, and the Fed’s clock does not apply to that layer at all.
The composition inside that snapshot matters too. USDT made up $61.5 billion of the exchange held total and USDC $10.1 billion. The Fed rule reaches issuers it directly supervises, and Tether is not among them, so the largest slice of the market’s exchange held stablecoin exposure would sit outside the new ceiling even after full implementation.
Nothing in the proposal addresses exchange risk. The rule is issuer-scope, and most of the $76 billion in question is held at third party venues operating under a mix of state licenses, offshore registrations and pending federal applications. The Fed’s draft leaves that layer to securities and banking regulators, who have been slower to settle their frameworks.
Traders saw the limits of that structure directly this month. Commentators leaned on the proposal to argue that the redemption clock would dampen liquidation cascades in a falling market, but that argument assumes users can actually redeem, which is exactly what an exchange-held balance does not guarantee during stress. In every major stablecoin failure, the losses concentrated at intermediaries rather than at direct issuer redemptions.
Where the industry stands
The market is not waiting for the finals. Circle already operates at or inside the two day window through its voluntary attestation regime, and Tether has never offered a contractual guarantee at all, a gap the Troutman Pepper newsletter flagged in its October 1 overview of the two draft rules. Larger banks are watching the anti-tying provisions closely, which would prevent a bank from conditioning stablecoin services on buying its own products.
“The proposed rule would define redemption obligations for issuers within the Board’s remit, with exceptions and eligibility checks,” the Andersen analysis noted, adding that the Fed’s clock “concerns eligible requests to Board supervised issuers, subject to screening and exceptions.”
How the rule lands in practice depends on the comment period. The GENIUS Act directs the Fed to write it, but the statute leaves the agency room on exceptions and disclosures, so the final text can tighten or loosen what the draft now proposes. The comment window runs into late November, with a final rule expected sometime in 2027.
Why the clock matters
A two day ceiling is the difference between a bank run in fast forward and an orderly withdrawal queue. In the May 2022 UST collapse, holders capitulating within hours torpedoed the token and set off a sector-wide credit unwind that took down three lenders. Interim depegs have shown the same speed dynamic, small breaks that turned into runs once social feeds amplified them. The industry push to get redemption guarantees into law is a direct response to those episodes.
The proposals now in comment would move the regulated market to a place where a user’s guarantee is a statutory clock rather than a product promise. That matters most for payments use, where payroll batches and settlement flows need predictable timing, and for corporate treasuries holding stablecoins as cash equivalents under new accounting guidance. A weekend panic at an issuer could no longer stretch into an open week of uncertainty.
The unresolved part is the exchanges, the layer where most retail users actually hold their tokens. Until exchanges carry their own redemption or segregation rules, the Fed’s guarantee stops at the issuer’s door, and the $76 billion question stays where it is today.