FDIC Head Confirms Stablecoin Deposits Won't Receive Insurance Protection Under GENIUS Act
The federal agency has outlined plans to prohibit third-party 'pass-through insurance' arrangements for stablecoins, while also confirming the FDIC will not provide deposit coverage under the legislation.
The head of the US Federal Deposit Insurance Corporation (FDIC), Travis Hill, has stated his position that legislation enacted in July does not grant the agency authority to provide guarantees for deposits held in stablecoins.
During prepared statements delivered at the American Bankers Association (ABA) Washington Summit on Wednesday, Hill explained that according to regulations governing the stablecoin payments legislation known as the GENIUS Act, the FDIC would not permit government guarantees for deposits after the law reaches full implementation. In addition, those who issue stablecoins would face restrictions preventing them from claiming that these digital assets carry FDIC insurance, while a plan under consideration would eliminate third-party 'pass-through insurance' options.
If a payment stablecoin arrangement qualified for pass-through insurance, this would mean that if a bank holding the issuer's reserves in a deposit account failed, the FDIC would insure the deposit account based on the interests of the stablecoin holders, rather than insuring the account as a corporate deposit account eligible for only $250,000 of insurance.
Travis Hill, FDIC Chair
Congress passed and US President Donald Trump signed the GENIUS Act into law in July, creating a regulatory structure in the United States for payment stablecoins. Full implementation of the law is scheduled to occur either 18 months following the signing date or 120 days after relevant regulations receive final approval from agencies including the FDIC and Treasury Department.
Despite the FDIC's decision not to provide insurance coverage for deposits held by stablecoin holders, companies that issue these digital assets will still face requirements to maintain complete backing for their dollar-pegged tokens.
Stablecoin yield debate continues in market structure bill
The statements from Hill did not address the digital asset market structure legislation currently being reviewed in the US Senate, where debate has intensified among lawmakers and representatives from the cryptocurrency and banking sectors regarding the treatment of stablecoin yield, tokenized equities, and ethical considerations.
In a statement released toward the end of January, the ABA identified among its various priorities for this year the goal to 'stop payment stablecoins from becoming deposit substitutes that slash community bank lending by prohibiting paying interest, yield or rewards regardless of the platform.'
Three separate meetings have been convened by the White House with industry leaders during this year to explore pathways for advancing the bill, though as of Wednesday, uncertainty remained regarding whether or when the legislation would progress forward.