The Federal Reserve Board published a FEDS Notes analysis exploring how payment stablecoins, as defined under the Genius Act’s framework, could reduce frictions in cross-border payments and alter monetary policy implementation through changes in the demand for central bank liabilities and other safe assets. The note frames payment stablecoins as a new form of money designed to maintain a one-to-one value against the U.S. dollar and backed by relatively safe assets, while being prohibited from directly paying interest. Using a stylized cross-border payment example involving individuals and small banks, the analysis explains how stablecoins could shorten payment chains and reduce reliance on correspondent banking, potentially lowering fees, improving speed and transparency, and reducing redundant AML/CTF compliance checks, while still leaving material “on-ramp” and “off-ramp” costs and a continuing role for large banks as inventory holders and foreign exchange counterparties. It then considers three reserve-asset backing strategies and their differing implications: backing with bank demand deposits could expand balance sheets at deposit-hosting banks and increase their reserve demand by less than one-to-one; backing with U.S. Treasury bills could raise demand for bills and affect yields and liquidity while pushing other investors into alternative assets; and backing with Federal Reserve balances could leave net reserve demand close to unchanged, given the issuer’s matching reserve holdings and banks’ incentive to hold interest-bearing reserves rather than non-interest-bearing stablecoins. The note highlights that large-scale adoption could require the central bank to recalibrate reserve management in response to potentially volatile and sizable payment flows between banks and stablecoin issuers, and it points to ongoing federal and state implementation of the Genius Act as a key driver of adoption and ecosystem design.
Federal Reserve Board 2026-03-30
Federal Reserve Board research assesses payment stablecoins for cross-border payments and implications for monetary policy implementation
The Federal Reserve Board published a FEDS Notes analysis on how payment stablecoins defined under the Genius Act could reduce frictions in cross-border payments and affect monetary policy by changing demand for central bank liabilities and other safe assets. The note assesses reserve-asset backing strategies for payment stablecoins, highlighting impacts on bank balance sheets, U.S. Treasury bill markets, and Federal Reserve balances, and concludes that large-scale adoption could require recalibration of reserve management amid volatile flows between banks and stablecoin issuers.