The Federal Reserve just fired the starting gun on what could become the most consequential regulatory shift for stablecoins since, well, ever. In a June 2026 notice of proposed rulemaking, the central bank laid out requirements for permitted payment stablecoin issuers, or PPSIs, to establish formal customer identification programs.

The proposal implements anti-money laundering provisions baked into the GENIUS Act, the landmark legislation enacted on July 18, 2025, that created the first federal regulatory framework specifically designed for payment stablecoins. Jerome Powell voiced support for the new rules. Kevin Warsh, who was confirmed as Fed Chair in May 2026, abstained from the vote.

What the rules actually require

Under the proposed framework, PPSIs would need to build out customer identification programs, commonly known as CIPs. The GENIUS Act itself goes further than just customer screening. PPSIs are required to hold reserves in high-quality liquid assets on a strict 1:1 basis. Issuers must also maintain rapid redemption policies. One notable restriction: PPSIs are prohibited from offering interest or yield to token holders.

The Fed isn’t working alone here. Treasury, FinCEN, and OFAC have issued joint proposals targeting AML and sanctions compliance for stablecoin operations. The National Credit Union Administration separately proposed its own standards for PPSIs on May 15, 2026, with a public comment period running through July 17, 2026.

The Powell-Warsh dynamic

Warsh was confirmed as the incoming Fed Chair in May 2026. His decision not to vote either way could signal that he wants flexibility to shape the final rules once he’s fully settled into the role. Powell built the proposal. Warsh will decide how tightly the screws get turned during implementation.

Winners, losers, and what investors should watch

Companies like Circle and Paxos, which have spent years building robust Know Your Customer frameworks, are positioned to absorb these requirements without breaking stride. Smaller issuers and newer entrants face a steeper climb. The barrier to entry in the US stablecoin market just got meaningfully higher.

International stablecoin providers that don’t want to comply with US AML requirements may find themselves shut out of dollar-denominated markets. That could consolidate the stablecoin landscape around a smaller number of US-regulated issuers, at least for dollar-pegged tokens.

The 1:1 reserve requirement deserves particular attention from investors. The definition of “high-quality liquid assets” will determine how much flexibility issuers have in managing their reserves. If the final rules define this narrowly, think US Treasuries and cash equivalents only, it could compress margins for issuers and potentially lead to consolidation in the market.

The GENIUS Act explicitly positions US-regulated stablecoins as instruments of dollar dominance in digital payments. Washington is betting that private-sector stablecoins, properly supervised, can extend the dollar’s reach more effectively than a government-issued digital currency.