Federal Reserve limits stablecoin redemptions to two days but excludes exchange holdings

The Federal Reserve wants to guarantee stablecoin holders can redeem for dollars within two business days, but the rule only binds issuers it directly supervises, not the exchanges where tens of billions of dollars in tokens actually sit. That distinction matters to institutional treasuries and market makers who assume “Fed-regulated” stablecoin means fast, guaranteed cash conversion during a stress event.

• Fed’s Federal Register notice, published September 29, sets a two-business-day redemption limit under proposed section 247.12
• Andersen Institute researchers traced $76 billion in stablecoins at centralized exchanges in a July 28 snapshot
• During the March 2023 USDC stress episode, exchanges holding 15.2% of supply accounted for 40% of the subsequent decline

• $76B stablecoins sitting at exchanges as of July 28, per Andersen
• 2 days Fed’s proposed maximum redemption window for supervised issuers
• 15.2% share of USDC supply held on exchanges before March 2023 stress
• 40% share of USDC’s subsequent supply decline that came from exchanges

The Federal Reserve Board announced its stablecoin redemption proposal on September 24, and the text was published in the Federal Register on September 29. It would require Board-supervised payment stablecoin issuers to disclose redemption procedures and meet requests within two business days under normal circumstances. According to reporting by CryptoSlate, the rule stops short of reaching the $76 billion in reserve-backed stablecoins that researchers located sitting at centralized exchanges.

Proposed section 247.12 sets a two-day clock with built-in exceptions

The Fed’s draft rule applies only to payment stablecoin issuers supervised by the Board. It does not govern the exchanges that actually hold customer balances on their behalf.

Under proposed section 247.12, an issuer’s normal redemption period cannot exceed two business days, and issuers must accept requests for at least one token, subject to screening and onboarding checks. The Board retains authority to extend that window for reasons tied to safety, financial stability or the public interest. The proposal also includes limited safe harbors for delays linked to required customer verification or circumstances outside an issuer’s control, and the rule remains open for public comment.

A customer holding tokens at an exchange faces a separate step before ever reaching the issuer. The exchange must first release or convert that balance under its own terms, a transaction the Fed proposal does not address.

Circle Mint eligibility and Tether’s $100,000 minimum sit between exchange balances and issuers

The Andersen Institute’s July 28 snapshot breaks the $76 billion into $61.5 billion of USDT, $10.1 billion of USDC and smaller balances of other tokens at exchanges, across 12 reserve-backed dollar stablecoins in total. Researchers call the figure a lower bound because some exchange wallets cannot be identified. Applying the Fed’s proposal to that total requires issuer-by-issuer analysis, since the text covers only Board-supervised issuers and the snapshot mixes distinct regulatory categories.

Circle’s own USDC terms limit direct redemption outside the European Economic Area to holders with a Circle Mint account in good standing, a service the firm describes as built for institutional distributors rather than retail exchange customers. Tether’s current terms require a verified customer and set a $100,000 minimum for direct redemption.

Coinbase’s US customer agreement states that a customer owns the USDC balance in their wallet. But Coinbase is not obliged to repurchase USDC for dollars and may instead point customers to Circle for direct redemption under Circle’s separate terms.

March 2023 USDC stress test shows exchange balances lag before they lead

Andersen researchers used March 9, 2023 as a pre-shock baseline to study how USDC moved through exchange wallets during that month’s stress episode. Exchanges held 15.2% of USDC supply at the time, yet accounted for 40% of the subsequent decline in total supply. From March 10 to March 13, USDC supply fell $2

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