Stablecoin reserves, fees and redemption delays

Imagine a business paid in stablecoins on a Friday. Its wallet shows 100,000 units, each intended to be worth one dollar. Its supplier expects a bank transfer. Between the wallet and that payment sit a possible buyer, an issuer, the issuer’s banks and several compliance checks. The wallet balance says little about when the invoice can actually be paid.

The Federal Reserve’s proposal, announced on September 24, 2026, and published in the Federal Register on September 29, addresses precisely that gap. For issuers within its supervisory perimeter, the Fed proposes full reserve backing and redemption within two business days after a request, subject to exceptions. Comments are due by November 30. As of September 30, these are proposed provisions, not an immediately enforceable promise from every stablecoin issuer. Federal Reserve Board requests comment on proposals to implement the GENIUS Act Fed proposal

Understanding the promise means following the dollar all the way to the bank account. Asset quality matters. So do the holder’s right to access those assets, the fees and the machinery needed to turn them into available money.

Two exits, funded by different dollars

A reserve-backed payment stablecoin is a token whose issuer seeks to maintain its value in a specified currency by holding assets against issuance. This article focuses on dollar tokens redeemable through an issuer, rather than algorithmic arrangements or structures backed by other crypto-assets. The U.S. proposal sets out the relationship between outstanding tokens, reserve assets and redemption. Fed proposal Public Law 119-27 : GENIUS Act

The first exit is a sale. You sell your token on a venue to someone willing to buy it. The money comes from that buyer, possibly through a market maker. Ownership changes; that transaction alone leaves the issuer’s reserves and outstanding claims unchanged. A dollar balance credited by the venue must then be withdrawable to your bank. The USDC terms explicitly distinguish market transactions from direct redemption. USDC Terms

The second exit goes through the issuer. An eligible holder surrenders tokens in exchange for dollars drawn from reserves. Once redemption is completed, the corresponding claims are extinguished; the technical sequence for withdrawing or burning tokens depends on the arrangement. This route directly tests the issuer’s ability to pay. The Fed’s proposed redemption requirements cover the issuer and its agents, while excluding secondary-market trading between third parties. Fed proposal

Arbitrage connects the two routes: buying a token below one dollar and redeeming it at par can produce a gain. That requires effective access to redemption and a sufficient margin after fees and financing costs. A professional able to advance dollars can accommodate sellers who need an immediate exit. Its balance sheet carries part of the waiting period. Market prices therefore also depend on intermediaries’ ability to bridge the gap. This is an economic mechanism, not a measurement of their current capacity.

The clock the Fed proposes

The proposed ceiling is expressed in business days. In a calendar example with no intervening holiday, an eligible request made on Friday, October 2, would be followed by the first business day on Monday, October 5, and the second on Tuesday, October 6. This is an illustration of the proposed rule, not a scheduled transaction or a forty-eight-hour promise. Fed proposal

The proposal would require publication of redemption terms and fees. Within its scope, it would also require acceptance of requests for at least one unit, subject to applicable checks. The Fed could extend the deadline for safety and soundness, financial stability or public-interest reasons. Separate provisions address necessary additional identity, anti-money-laundering or sanctions checks, as well as certain delays beyond the issuer’s control. To rely on that protection, the issuer would need to demonstrate to the Fed that it had made all reasonable efforts to resolve the delay. A surge in redemption requests would not, by itself, qualify for that protection. Fed proposal, §247.12

Interbank settlement has a calendar of its own. Fedwire, one of the U.S. funds-transfer systems, operates in transfer business days running from 9 p.m. Eastern Time on the preceding calendar day normally to 7 p.m., excluding service extensions on the business day itself. The service therefore opens on Sunday evening for Monday’s transfer day, when Monday is a business day. A payment system’s opening hours are distinct from the processing of a customer request by the issuer or its bank. Fedwire Funds Service and National Settlement Service Operating Hours

There is a concrete alternative: FedNow operates around the clock, every day of the year, for participating institutions. Connected banks with funds already available can shorten the journey. The existence of that infrastructure says nothing, however, about any particular issuer’s participation or its prepared liquidity. About the FedNow Service

Section 247.12 concerns redemption by the issuer and its agents. That alone does not guarantee the exact time funds appear at every recipient bank. The useful question is which event a stated deadline measures. Sending a payment instruction, settling between institutions and making money available to the recipient are distinguishable stages. A meaningful commitment identifies its starting point, intended outcome and the circumstances in which checks pause or lengthen the process.

Reserves have both a value and a payment capacity

The U.S. proposal would require the fair value of reserves, measured or estimated at market value, to cover outstanding tokens at face value at all times. Daily measurement would be a minimum control, not permission for a shortfall between checks. Permitted assets include cash, certain deposits and U.S. Treasury securities with 93 days or less remaining to maturity. Full backing can therefore consist partly of short-dated claims rather than dollars ready for immediate transfer. Fed proposal, §247.11

To pay before a Treasury bill matures, an issuer needs another way to obtain the cash, such as a permitted sale. It must find a counterparty, settle the transaction and have the proceeds available at a bank able to pay. Short, liquid assets make this easier. Maturity schedules, settlement arrangements and bank access determine the usable payment capacity. The Fed accordingly treats reserve composition, liquidity and redemption requirements as separate subjects. Fed proposal Statement on the proposal implementing the GENIUS Act

Consider a teaching model, unrelated to any issuer’s actual accounts. One billion tokens are backed by one billion dollars of assets: $200 million immediately payable and $800 million in short-dated securities. Holders simultaneously request $350 million. Assets fully cover claims, but the issuer must mobilise another $150 million to satisfy all requests.

With an assumed cash-mobilisation capacity of $50 million per business day, cumulative payments reach $250 million on D+1, $300 million on D+2 and $350 million on D+3. At $150 million per day, the requests are settled on D+1. The second arrangement pays faster with exactly the same initial assets. The first would exceed the Fed’s proposed ordinary deadline, assuming all other conditions are satisfied.

l0g calculation, model data as CSV. Initial reserves: USD 1 billion against 1 billion tokens, comprising USD 200 million ready cash and USD 800 million securities. The daily capacities of USD 50 million and USD 150 million are assumptions. Cumulative payment is min(350, 200 + capacity × day). No new flows, losses, fees or compliance holds; funds become payable the same day.

The model assumes no losses on securities, no new issuance and no compliance delays. Mobilised funds become payable the same day. These deliberately favourable assumptions isolate a capacity constraint. The proposal also requires operational ability to monetise reserves (section 247.11(a)(3)); the slow scenario illustrates a deficiency to correct. The figures represent neither actual portfolios nor a calibrated regulatory stress test.

Holding more ready cash, staggering maturities or maintaining several banking routes can improve the response. Those choices require operational resources and can affect reserve returns. Liquidity management reappears behind the digital experience: the holder can transfer a token quickly, while the issuer must prepare to meet a collective demand for dollars.

Par value after fees

Access conditions differ across issuers and jurisdictions. Outside the European Economic Area, the USDC terms make direct redemption conditional on an eligible Circle Mint account in good standing. A person can hold tokens while still needing to satisfy additional requirements to use that exit. The EEA has a separate arrangement, discussed below. USDC Terms

Tether, the issuer of USDT, publishes a schedule that offers a particularly clear example of exit costs. As reviewed on September 30, the minimum is $100,000, with a redemption fee equal to the greater of $1,000 or 0.1%. A $100,000 redemption therefore incurs a 1% fee, leaving $99,000. At $1 million, the same minimum represents 0.1%. These calculations exclude verification, network and bank charges. Tether

Source: Tether schedule checked September 30, 2026; calculations as CSV. Minimum redemption USD 100,000; fee = max(USD 1,000, 0.1% of the amount). Common 0–1% scale. Verification, network and bank costs excluded. This is one issuer’s direct channel.

That structure helps explain the usefulness of intermediaries for smaller holders: they aggregate flows and use an access channel that each customer may not use directly. Their customer price must cover the service and its risks. The schedule describes one specific direct route, not a universal stablecoin tariff or an early application of the Fed’s proposal.

Waiting also ties up capital. In a separate illustration, advancing $1 million for three calendar days at an annual rate of 8% costs roughly $658, using a 365-day basis. This is not an observed market discount. It simply shows how “buy and redeem at par” can cost money before price or counterparty risk is considered.

One weekend in March 2023

The Silicon Valley Bank episode made the banking dependency tangible. Circle disclosed $3.3 billion, around 8% of its USDC reserves, in deposits at SVB. The release was dated March 12, 2023, while the page was published on March 13. It described an exposure to a bank within the reserve itself. $3.3 Billion of USDC Reserve Risk Removed, Dollar De-Peg Closes

On March 12, 2023, the U.S. Treasury, Fed and FDIC announced that all SVB depositors would have access to their money on Monday, March 13. That treatment resolved uncertainty over access to the affected deposits. The intervention concerned bank depositors; it did not establish permanent token insurance. The GENIUS Act itself states that payment stablecoins do not carry a federal guarantee or FDIC insurance as stablecoins. Joint Statement by Treasury, Federal Reserve, and FDIC Public Law 119-27 : GENIUS Act

The lesson concerns where reserve assets sit as much as how much they are worth. A claim on a bank, securities held by a custodian and cash available in a payment account have different exit paths. A single backing percentage leaves that financial geography unexplained.

When a shortfall rewards the first exits

The risk changes when reserve value falls below outstanding claims. The Fed uses an example of 100 million tokens backed by $95 million to illustrate the advantage that can accrue to holders redeemed first. A proportional allocation would yield $0.95 per token. If 35 million tokens are first redeemed at par, $60 million remains against 65 million tokens, or about $0.9231 each. Fed proposal, footnote 53 ; l0g calculation

The total shortfall is still $5 million. Remaining holders now bear it across a smaller base: their theoretical loss per dollar rises from 5% to 7.69%. The arithmetic assumes no capital injection, subsequent recovery or expenses. It illustrates an incentive to leave early, not a prediction of recoveries in a court-supervised process.

Source: Fed proposal, footnote 53, PDF p. 23; l0g calculations as CSV. Proportional loss = shortfall / remaining tokens, each with USD 1 face value. Common 0–10% scale. No recapitalisation, subsequent recovery or expenses; legal allocation in liquidation is outside this calculation.

This helps explain the proposal’s corrective provisions. A failure to maintain full backing would have to be reported, with a remediation plan, within 24 hours. Unless full backing is restored or the Fed directs the issuer to proceed with a plan, the issuer would have to begin liquidating reserves and redeeming tokens by 5 p.m., in the time zone of the appropriate Federal Reserve Bank, on the business day after the plan-submission deadline. That is a deadline to begin a process, not to complete every payout instantly. Fed proposal, §247.11(f)

Capital provides another layer of protection, absorbing losses that can affect the business or its assets. It is distinct from the reserves backing tokens. The proposal addresses both separately, distinguishing face-value backing from the company’s ability to absorb an incident. Board memorandum accompanying the September 24 proposals

In the EEA, find the relevant issuer

Under MiCA, a qualifying e-money token gives its holder a claim against the issuer. Article 49 provides for redemption at any time at par, without a redemption fee, subject to the provisions on recovery. The article does not set a universal five-day deadline. The par-value right, the execution procedure and potential charges by a third-party bank need to be read separately. MiCA, article 49

Circle France’s policy, updated September 15, 2026, provides an EEA retail form, checks and a bank account capable of receiving dollars. After tokens reach the deposit address, section 4.2 describes checks followed by payment to the bank account, and states that this process should take no more than five business days, unless discrepancies arise. That wording does not turn the initial form submission into an unconditional guarantee of bank credit on a certain date. Separate stress provisions address reserve rebalancing difficulties between entities. This is Circle’s stated policy; no independent series of observed processing times is used here. Circle France

For the user, the practical task is to identify the entity owing redemption, the version of the token issued directly on a supported blockchain and compatible bank details. A dollar redemption claim also leaves a currency issue when the invoice is in euros. The dollar’s euro value is a different risk from the token’s dollar peg.

A mechanical comparison between “two days” in the United States and “five days” at Circle France would mix a proposed regulatory rule with an issuer procedure under another legal framework. Starting points, checks and crisis circumstances must be aligned before comparing service. Fed proposal MiCA, article 49 Circle France

The useful measure is money available by the deadline

Sound reserve assets, accessible redemption and prepared payment arrangements can make the model work efficiently. Instant banking infrastructure and intermediaries that advance funds show that a wait of several days is not technically inevitable. Speed still requires someone, somewhere, to have dollars ready at the right time. About the FedNow Service ; l0g analysis

A reserve attestation, meanwhile, describes an asset stock at a particular date. It provides essential information about backing, while leaving access conditions and redemption performance to be examined separately. The Fed’s proposal itself distinguishes reserve reporting from redemption duties. A month-end reserve report could be published as late as noon on the last day of the following month: the available snapshot would have its own lag, while the backing requirement would remain continuous. Fed proposal, §247.11(d)

There is consequently no universal waiting time that can be inferred from “100% backed”. For a business with a bill due on Monday, the decisive question is an observable outcome: how many dollars will actually be available in its bank account on Monday, after checks and fees? The backing ratio supplies part of the answer. Contracts, banks and prepared liquidity supply the rest.

For further reading, our guide to stablecoins and the GENIUS Act maps the U.S. framework, while the liquidity factory of repo explains how securities can be turned into usable funds.

Sources and documents

Scope and method

Research cut-off: September 30, 2026. The article distinguishes the enacted GENIUS Act, the Fed’s proposed rule, European law and issuer-declared policies. It does not measure actual average provider performance: no comparable independent series was established in this research. The liquidity, funding and calendar examples are hypothetical. Tether fees are calculated from the published schedule; the reserve-shortfall example uses the Fed’s assumptions. No current market-price data or depeg forecast is used.

Three downloadable datasets are provided: hypothetical liquidity, calculated Tether fees and the Fed shortfall example. Illustrative funding cost is 1,000,000 × 0.08 × 3 / 365 = USD 657.53. The proportional loss after early exits is 5 / 65 × 100 = 7.6923%. The text and charts round figures while the files retain precision.