FDIC Clears Path for Bank-Issued Stablecoins Under GENIUS Act

This article was first published on Deythere.

The United States is on the cusp of a change in digital finance as regulators move forward with allowing banks to issue payment stablecoins under the recently passed GENIUS Act. 

Just recently, the Federal Deposit Insurance Corporation (FDIC), approved a Notice of Proposed Rule detailing the application procedures and criteria for FDIC-supervised banks and their subsidiaries to become Permitted Payment Stablecoin Issuers.

The rule centers on the safety, reserve backing, governance and transparency requirements that banks will have to meet before they issue stablecoins, and imposes hard deadlines for regulatory decision-making.

What is the GENIUS Act and its Stablecoin Structure?

The GENIUS Act requires stablecoin reserves to be redeemable one-to-one with acceptable assets, and under the necessary control of the issuer while conforming to rules about disclosure, liquidity, and governance. 

The law also specifies that these digital assets are not deposits or securities, putting them into a separate category with its own form of oversight. 

The FDIC, in coordination with the other federal and state regulators as appropriate, will issue detailed regulations to ensure that issuance of stablecoins complies with safety and soundness requirements consistent with those applicable to traditional banks.

What the FDIC Stablecoin Rule Proposes

The FDIC’s proposed rule sets out the process for how FDIC-supervised banks, i.e., state nonmember banks and state savings associations may apply to become Permitted Payment Stablecoin Issuers through separately capitalized subsidiaries. 

Instead of permitting banks to issue stablecoins on their own balance sheets, the rule calls for a separate subsidiary that would be responsible only for stablecoin issuance. 

Applicants are required to submit detailed documentary evidence relating to corporate governance, composition of reserves, liquidity management, redemption policies and practices, capital adequacy, AML controls and third-party service arrangements. 

This level of transparency is designed to help ensure the value of such stablecoins remains fully-backed and that potential risks are identified and addressed at an early stage.

The rule would also impose time frames on regulators to act. The F.D.I.C. would have 30 days to decide if an application is largely complete, followed by a 120-day cycle to approve or deny it. If the FDIC does not act within that time after an application is considered complete, the rule would generally consider such an application approved by operation of law; a mechanism intended to prevent regulatory gridlock. 

Denials would have to be based on safety and soundness, and applicants would be able to avail themselves of a formal appeals process. Public comments will be taken for 60 days after the rule is published in the Federal Register.

What This Means for the Stablecoin Ecosystem

The FDIC’s proposal is the first major regulatory plan for stablecoins to have been drafted by any federal agency in the United States. 

Before, stablecoins thrived under a mishmash of state and federal regulation with complaints from regulators such as the SEC or Commodity Futures Trading Commission being argued on a case-by-case basis without a clear statutory framework. 

Now, with the GENIUS Act and the FDIC’s rulemaking efforts, there is a clear path for regulated issuers of such assets that could displace stablecoin activity from offshore or lightly regulated jurisdictions.

This model sees stablecoins within the traditional banking system, regulated as ordinary financial products. By making issuers back their stablecoins 1:1 and comply with robust reporting standards, regulators hope to keep these digital assets trustworthy as they are gradually added to the financial system. 

Industry and Market Reactions

Banks and digital assets firms have generally welcomed the FDIC’s moves as a necessary step toward legal clarity. 

Stablecoin issuers and major payment companies have previously pressed for clear guidelines to avoid regulatory uncertainty that may stall investment and innovation. 

Through a visible application process and definite timelines, the proposed rule provides an industry standard that businesses can use to schedule product offerings and compliance programs. 

Some even anticipate competitive forces at play where regulated entities also provide their own stablecoins in conjunction with traditional banking to help bolster innovation in cross-border payments, liquidity settlement, and on-chain transaction infrastructure.

But there is still a debate among critics about whether the framework is entirely workable. For instance, the compliance and capital costs may favor incumbents on a larger scale and deter smaller fintech participants. 

Additionally, the requirement that stablecoins be issued via distinct banking subsidiaries could introduce operational complexity and regulatory overhead for issuers. 

Conclusion

The FDIC’s rule proposal laying out its position on stablecoin issuance under the GENIUS Act is a welcome development in U.S. digital asset regulation. 

Through establishing application processes, reserve requirements, governance aspects of the arrangements and regulatory reporting channels to be employed, the FDIC is providing a pathway for payment stablecoins to enter into the bank-regulated financial system in a way that allows them both innovation and consumer protection. 

Though the rule is not yet final and still under public comment, its very existence offers a template for banks hoping to create stablecoins, including those institutions’ obligations around reserve coverage, compliance with regulations and oversight. 

Glossary

Payment stablecoin: A Digital Asset intended to be used for payment or settlement purposes and which maintains a stable value by reference to the value of some currency, such as US dollars.

GENIUS Act: U.S. law in 2025 which sets up a federal regulatory structure over payment stablecoin issuers and has certain reserve compliance requirements.

Reserve Backing: would require holding liquid U.S. dollars (or perhaps short-term Treasuries) equivalent to the amount of stablecoins in circulation.

Independent Verification: the process that issuers must utilize to have their reserve asset holdings and liquidity operations externally audited.

Stablcoin Certification Review Committee: A federal entity, which is chaired by the Secretary of Treasury and tasked with reviewing state-issued regulations for stable coin issuance.

Frequently Asked Questions About FDIC Stablecoin Rules

What does the FDIC stablecoin rule do?

The FDIC’s regulation proposes how FDIC-supervised banks could seek to issue stablecoins under the GENIUS Act, including application processes, reserve requirements and compliance standards.

Who is authorized to issue stablecoins in the GENIUS Act?

Only approved entities could issue stablecoins, such as bank subsidiaries, OCC-supervised nonbanks, and state regulators that have certified that an entity meets a stated framework.

What does it mean to have reserves for stablecoin issuers?

Reserves cover at least dollar-for-dollar in highly liquid assets, including U.S. money, insured deposits, and short-term Treasuries that issuers must maintain.

Is the FDIC’s proposal final?

No, the plan is out for public comment and will be revised before adoption.

Does this rule affect the use of stablecoins?

Yes, it brings stablecoin issuance to regulated finance, with a goal of adding trust and oversight.

References

FDIC
American Banker
Forbes
St. Louis Fed
PYMNTS
Brookings