Conclusion first

On September 24, 2026, the Federal Reserve released two proposed rules and opened them for public comment: one implements its supervisory responsibilities over permitted payment stablecoin issuers, and the other sets out the procedure for state member banks supervised by the Federal Reserve to apply to issue payment stablecoins through a subsidiary. The proposals address reserve assets, capital requirements, risk management, custody of reserves, redemption, and the bank application process. These documents have not yet become final rules, and the specific requirements may still be adjusted, but the regulatory direction is already very clear:For stablecoins to become a payment instrument at scale, they cannot rely solely on code and market liquidity; they must answer the questions traditional finance has long asked—whether the assets are real, whether the liabilities can be redeemed, who bears the risk, and how to exit in the event of failure.

The significance of this for Chinese enterprises is not that U.S. rules will automatically apply to all Chinese entities. The more realistic impact is that the issuance, custody, and bank access methods of U.S. dollar stablecoins will gradually change the transaction conditions for cross-border business. Even if a Chinese enterprise is not an issuer, as long as it comes into contact with stablecoins in trade settlement, platform receipts and payments, overseas investment and financing, or digital asset services, it may face a series of issues such as bank due diligence, counterparty review, sanctions screening, accounting and tax, and proof of source of funds.

What the new proposals change is not the "coin," but the liability structure behind stablecoins

The Federal Reserve's announcement outlines two sets of institutional arrangements. The first set targets permitted payment stablecoin issuers supervised by the Federal Reserve, requiring that stablecoins be fully backed by specified eligible reserve assets, such as short-term U.S. Treasury securities and other high-quality, highly liquid assets; it also sets capital and risk management requirements and regulates the custody of stablecoin reserve assets. The second set targets state member banks supervised by the Federal Reserve that wish to issue stablecoins through a subsidiary, requiring them to submit application documents such as business plans and financial materials, and establishing review, hearing, and reconsideration procedures.

The proposed rule text, which runs to hundreds of pages, further breaks regulation down into modules including issuance activities, reserve assets, redemption, risk management, audit reports, capital, custody segregation, and the prohibition of tying arrangements. The text proposes to assess at fair value whether reserves can continuously cover the face value of stablecoins, and discusses redemption capacity, run risk, minimum capital for newly established issuers, and stablecoin-related activities that banks may conduct. The proposed rules also propose to prohibit issuers from marketing in a manner that would cause a reasonable person to mistakenly believe that a payment stablecoin is legal tender, is issued, approved, or guaranteed by the United States, and from directly or implicitly suggesting that it is insured by federal deposit insurance or credit union insurance.

These arrangements show that the object of regulatory attention is not a string of on-chain tokens, but a balance sheet and a set of ongoing operating mechanisms. What stablecoin holders see is a transferable digital instrument, while what regulators see is the issuer's redemption liability, the market and custody risks of reserve assets, and the complete chain of responsibility from issuance to redemption.

First main line: reserve assets are not enough simply by "being there"

Stablecoins typically use "one-to-one reserves" as the basis of trust, but enterprise users cannot look only at the reserve ratio published by the issuer. At least four questions should also be asked.

First, what assets make up the reserves. Cash, short-term Treasury securities, bank deposits, repo assets, and money market funds differ in credit, tenor, and liquidity. Even if the nominal value is the same, whether they can be quickly converted into cash under market stress may produce completely different results.

Second, on what basis are the reserves valued. The Federal Reserve proposal emphasizes using fair value to determine whether reserves can cover all outstanding face value, precisely because changes in asset prices may create a gap between "full backing" on the books and immediate redemption capacity.

Third, who custodies the reserves and whether they are segregated from the issuer's other property. If the reserves are commingled with the issuer's own assets, or if the custody chain is unclear, whether holders can obtain redemption on a priority and direct basis may become disputed in the event of the issuer's insolvency, judicial freezing, or operational incident.

Fourth, who is entitled to the returns generated by the reserves. A stablecoin may appear to be merely a payment medium, but the issuer may generate commercial returns through interest on the reserves. It is advisable to impose restrictions on the payment of interest or returns to holders, and to monitor arrangements that circumvent such restrictions through affiliates or white-label cooperation. This means that stablecoin product design cannot look only at the marketing name; it should look through to the contractual relationships among the issuer, the cooperating platforms, and the return arrangements.

Second main thread: redemption capacity is the legal core of "stability"

An on-chain transaction price temporarily close to one U.S. dollar does not mean that holders will necessarily be able to redeem at par and in a timely manner. Market trading and redemption from the issuer are two different mechanisms: the former depends on buyers and sellers and on the liquidity of the trading platform, while the latter depends on the issuer's legal obligations, operational capacity, and ability to liquidate the reserves.

The Federal Reserve's proposal discussed redemption at par, processing time limits, and risks under stress scenarios. The traditional financial logic behind it is quite simple: if there is a shortfall in some of the reserves, those who redeem earlier are more likely to receive full payment, while the losses borne by the remaining holders increase, thereby creating a run. So-called "stability" is ultimately not a horizontal line on a price chart, but whether all eligible holders can, under the circumstances permitted by the rules, exchange the digital tokens back for the corresponding currency in accordance with the agreement.

Therefore, in offshore transactions in relevant jurisdictions that permit the use of stablecoins, when Chinese enterprises agree in a contract to pay in stablecoins, it is inadvisable to specify only the currency, chain, and wallet address. They should also clarify the standard for completion of payment, handling of network congestion or chain forks, liability for erroneous addresses, alternative payment in the event of de-pegging or suspension of redemption, transaction fees, freezing and compliance review, refund paths, and the allocation of risk where payment cannot be made due to problems with the issuer or the trading platform.

Third main thread: once banks enter, stablecoins will not thereby become "frictionless funds"

Even if qualified banks and their subsidiaries are permitted to participate in issuance, custody, or other stablecoin-related activities, this does not mean that due diligence will be reduced. On the contrary, as stablecoins gradually enter the regulated banking system, customer identity, beneficial ownership, source and use of funds, sanctions lists, suspicious transaction monitoring, and recordkeeping may become more institutionalized.

For Chinese enterprises, this will produce a change that is easily overlooked: the technical success of an on-chain transfer can only prove that a certain digital asset has been transferred from one address to another; it cannot automatically prove that the underlying trade, contract performance, source of funds, tax treatment, and cross-border fund path are lawful. Banks or counterparties may still require contracts, invoices, logistics documents, customs declarations, service deliverables, board authorizations, proof of wallet control, and historical transaction records to corroborate one another.

This is not fundamentally different from traditional cross-border payments. Technology has changed the way records are kept and value is transmitted, but it has not eliminated the authenticity of transactions or the responsibilities of the parties. The closer stablecoins come to mainstream payment infrastructure, the more likely they are to be required to form an evidence chain that can be understood by banks, auditors, and regulators.

Four practical implications for Chinese cross-border business

"Usable overseas" must not be understood to mean that participation within China is naturally permitted

The U.S. regulatory framework addresses the question of who may issue, custody and provide related services under U.S. law; it does not alter the regulatory boundaries that mainland China applies to virtual currency-related business. A 2021 notice issued by the People's Bank of China and nine other departments expressly provides that virtual currencies, including so-called stablecoins such as Tether, do not have the same legal status as legal tender; virtual currency exchange, centralized trading, matching, token financing, derivatives trading and other related business constitute illegal financial activities. In November 2025, a joint meeting convened by the People's Bank of China reiterated that the prohibitive policy on illegal financial activities relating to virtual currencies will continue to be maintained. Which jurisdictions domestic enterprises, overseas subsidiaries, employees and customers are respectively situated in, who is making the trading decisions, and where the funds and services actually occur still require case-by-case assessment. Contracting through an overseas entity does not automatically sever domestic operational, foreign exchange, tax or criminal risks. This article discusses legally permitted overseas scenarios and the identification of cross-border risks; it does not constitute a proposal for using stablecoins within mainland China.

The regularization of U.S. dollar stablecoins may raise transaction thresholds rather than simply reduce costs

Reserve, capital, custody and audit rules may help reduce certain credit risks, but compliance costs may ultimately be reflected in issuance, redemption, custody, transaction limits and customer due diligence. When comparing payment solutions, enterprises should calculate, in addition to headline fees, account-opening costs, documentation costs, the probability of freezes, redemption times and alternative pathways.

The "digital dollar" and the digital renminbi are not the same legal structure

Payment stablecoins generally embody the holder's right to redeem against a private issuer; the digital renminbi, by contrast, is legal tender issued by the People's Bank of China. Both may use digital infrastructure, yet they differ fundamentally in issuer, credit basis, legal nature, operating system and risk allocation. When comparing cross-border payment solutions, enterprises cannot treat the two as interchangeable products based solely on settlement speed or programmable features.

Future competition may shift from the token itself to the "compliance network"

What an enterprise actually selects is not a single stablecoin but an entire set comprising the issuer, custodians, banks, wallets, trading platforms, on-chain analytics and redemption channels. Even if a stablecoin has a large market size, its practical usability remains limited if its partner institutions cannot serve a particular region, industry or counterparty. Conversely, a network that can connect trade data, compliance verification, bank financing and payment settlement may have greater commercial value than a sole pursuit of transfer speed.

Enterprises should now establish a "five-layer map of stablecoin transactions"

When preparing for or assessing stablecoin cross-border business, a five-layer structure can first be mapped out:

  1. Entity layer: the issuer, payer, payee, wallet controller, trading platform, custodian and their affiliate relationships;
  2. Asset layer: the types of reserves backing the stablecoin, custody location, audit or attestation, redemption rights, and bankruptcy remoteness;
  3. Transaction layer: the underlying contract, performance, pricing, invoices, logistics or service deliverables, and the reasons for choosing that payment instrument;
  4. Funds layer: where fiat currency enters, through which wallets the stablecoin circulates, how it is converted and exited, and whether alternative paths exist in the event of an anomaly;
  5. Compliance layer: licensing, foreign exchange, tax, AML/KYC, sanctions, data retention and dispute resolution requirements in each relevant jurisdiction.

A break at any one of these five layers may turn "funds already received" into a risk that is difficult to explain later. In particular, the corporate finance department can see bank statements but cannot identify on-chain addresses; the business department understands the contract but does not know where the stablecoin came from; an overseas subsidiary controls the wallet, while the domestic headquarters lacks complete authorization and accounting records. These information silos are often harder to deal with than technical failures.

Conclusion

The Federal Reserve's document this time remains a regulatory proposal, not a final rule already in effect. Enterprises should not draw conclusions immediately based on the proposal text, nor should they simply extrapolate U.S. rules to other jurisdictions. However, it provides a valuable observation window: when stablecoins attempt to move from the crypto asset market into everyday payments and cross-border settlement, regulators have not abandoned traditional finance but have reactivated long-tested tools such as reserves, capital, custody, redemption, risk management and market access.

For Chinese enterprises, the true value of stablecoins cannot be measured solely by "faster receipt of funds." A sustainable payment arrangement must withstand scrutiny of legal relationships, assets and liabilities, transaction authenticity, fund paths and regulatory responsibility at the same time. Technology can shorten transmission time, but it cannot replace the liability structure.

Main References

This article is provided for general information sharing only and does not constitute legal, tax, investment or compliance advice on any specific matter. The relevant recommendations remain at the public consultation stage, and the specific rules and scope of application shall be subject to the final rules and the legal instruments in force in the relevant jurisdictions at that time.