FDIC unveils regulatory framework for stablecoin issuers following GENIUS Act
Under newly proposed FDIC regulations, insurance coverage will apply to corporate deposits held by stablecoin issuers but will not protect individual stablecoin holders, according to the agency's interpretation of the GENIUS Act.
The Federal Deposit Insurance Corporation (FDIC) of the United States has introduced proposed regulations to oversee stablecoin issuers under its supervision, following the implementation of the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, legislation that became law nine months prior.
According to a Tuesday statement from the FDIC, the agency's board of directors approved the release of a proposal establishing standards for reserve requirements, redemption procedures, capital requirements, risk management protocols, and custody guidelines for both stablecoin issuers and insured depository institutions falling under its regulatory purview.
As the insurer of deposits at more than 4,000 financial institutions across the nation, the FDIC exercises supervisory authority over more than 2,700 banks and savings associations, working to preserve stability throughout the United States financial system.
When signed into law in July, the GENIUS Act provided the FDIC with regulatory authority over stablecoin operations conducted by banks and institutions under its supervision, although the law's provisions are set to become effective on Jan. 18, 2027, unless an earlier implementation date is established.
FDIC insurance won't directly protect token holders
According to the FDIC's statement, while reserve deposits that back a payment stablecoin would receive insurance coverage under the newly proposed regulatory framework, such protection would not be extended to individual stablecoin holders.
The agency contended that designating stablecoin holders as insured depositors would appear to be "inconsistent" with the GENIUS Act's explicit prohibition against payment stablecoins being covered by Federal deposit insurance programs.
Despite this limitation, the FDIC maintained that its proposed regulatory framework would still create a more "secure environment" for individuals holding stablecoins by providing them with "increased assurance that their payment stablecoins are subject to elevated regulatory and supervisory standards."
FDIC welcomes feedback
The agency has extended an invitation to members of the public to submit feedback addressing 144 questions concerning its approach to regulating stablecoin issuers. The comment period will remain open for the next 60 days.
This represents the FDIC's second regulatory proposal for executing the GENIUS Act, coming after a Dec. 19 initiative that outlined an application procedure for IDIs requesting authorization to issue payment stablecoins through subsidiary entities.
Additionally, the Office of the Comptroller is engaged in efforts to implement the GENIUS Act. The OCC's jurisdiction would encompass a wider range of stablecoin activity compared to the FDIC, given that it provides oversight for national bank subsidiaries as well as certain nonbank issuers.