Stablecoin issuer Circle has been working towards its goal of using the Federal Reserve’s payment rails for its USD Coin (USDC) stablecoin. However, the New York Federal Reserve has recently updated its rules for counterparties looking to participate in its reverse repurchase agreements (RRP), which could put Circle’s plans in jeopardy.

The RRP is a tool used by the Federal Reserve to manage the supply of money in the financial system. Counterparties, such as banks and other financial institutions, can use the RRP to lend cash to the Federal Reserve overnight in exchange for collateral.

Circle had previously expressed interest in using the RRP to facilitate USDC transactions, which could have provided a major boost to the stablecoin’s credibility and adoption. However, the new rules put in place by the New York Fed could make it more difficult for Circle to participate in the RRP.

The updated guidelines require counterparties to have at least $50 billion in eligible collateral to participate in the RRP, up from the previous requirement of $30 billion. This could make it more difficult for Circle to participate, as it may not have access to enough eligible collateral to meet the new requirement.

Circle has not yet commented on the new rules, but it remains to be seen how this will impact the company’s plans to use the Federal Reserve’s payment rails. If Circle is unable to participate in the RRP, it may have to find alternative ways to facilitate USDC transactions, which could slow down the adoption of the stablecoin.

The move by the New York Fed comes amid increasing scrutiny of stablecoins by regulators and central banks. Concerns have been raised over the potential risks to financial stability posed by stablecoins, which are pegged to the value of other assets, such as the US dollar.

In response to these concerns, the US Treasury Department has called for stablecoin issuers to be subject to the same regulatory framework as traditional banks. This could include requirements for capital reserves, customer protections, and anti-money laundering measures.

The regulatory landscape for stablecoins is still evolving, and it remains to be seen how this will impact the broader cryptocurrency market. However, the recent policy change by the New York Fed could be a sign of things to come, as regulators seek to ensure that stablecoins do not pose a threat to financial stability.

The impact of the New York Fed’s policy change on Circle’s plans to use the Federal Reserve’s payment rails for USDC transactions is uncertain at this time. However, it underscores the challenges facing stablecoin issuers as they navigate an increasingly complex regulatory landscape.