Federal Reserve Stablecoin Proposal Could Trigger 48-Hour Liquidation Window

The Federal Reserve has proposed new regulations for supervised payment stablecoin issuers, establishing a strict timeline for handling reserve shortfalls. If an issuer's reserves fall below the value of outstanding tokens, they have 24 hours to notify the Fed and submit a restoration plan. If the gap remains, the issuer must begin liquidating reserves and redeeming tokens by 5 p.m. on the next business day, a window the Fed notes can be less than 48 hours. The proposal allows continued token minting during this period to prevent on-chain panic. Issuers are required to maintain reserve assets equal to or exceeding outstanding tokens at all times, with daily fair value reporting at 5 p.m. local time. Once liquidation begins, minting must cease and redemption fees are prohibited. The public comment period for the 392-page proposal will remain open for 60 days following its publication in the Federal Register.