FDIC proposes stablecoin rules that give banks an edge over crypto issuers

The FDIC on April 7 proposed rules that would require payment stablecoin issuers to be subsidiaries of insured banks, effectively reserving the digital dollar market for the banking sector and narrowing the path for non-bank crypto firms.

"The proposal would establish prudential requirements for payment stablecoin issuers that are subsidiaries of FDIC-supervised banks," FDIC Chairman Travis Hill said in a statement accompanying the 144-question notice of proposed rulemaking. "It aligns in many respects with the proposed rule issued by the Office of the Comptroller of the Currency in late February."

Under the proposal, permitted payment stablecoin issuers must maintain reserves in US currency, demand deposits at insured depository institutions, or Treasury securities, with no more than 40% of reserve assets at any single financial institution. Redemptions must occur within two business days. Reserve deposits held at an IDI would be treated as corporate deposits of the PPSI, meaning they would not be insured on a pass-through basis to individual stablecoin holders — a departure from how some crypto-native issuers have marketed their products.

The rulemaking, part of the GENIUS Act enacted in July 2025, gives banks a structural advantage in the stablecoin market. Bank subsidiaries face a streamlined approval process through their primary federal regulator — the FDIC, OCC, Federal Reserve, or NCUA — while non-bank entities must seek OCC licensing as federally qualified PPSIs or operate under state regimes that the Treasury Department certifies as "substantially similar" to the federal framework. Comments on the FDIC proposal are due June 9.

Reserve rules and the yield prohibition

The FDIC proposal would prohibit PPSIs from paying any form of interest or yield to stablecoin holders solely in connection with holding the token, including through affiliated arrangements. The rule includes a presumption that compensation contracts with affiliates or related third parties constitute prohibited indirect yield, a provision that echoes the OCC's approach and has drawn attention from both banking and digital asset sectors.

PPSIs would also face a $5 million minimum capital requirement during a de novo period of roughly three years, with ongoing capital levels determined by the PPSI based on its risk exposures. An operational backstop of highly liquid assets — US currency, demand deposits, or eligible Treasury securities — must be held separately from reserves to fund operations during business disruptions.

Tokenized deposits remain deposits

The FDIC used the proposal to clarify that tokenized deposits recorded on blockchain or distributed ledger infrastructure remain deposits under the Federal Deposit Insurance Act. The agency amended its deposit insurance regulations to state that an IDI's choice of technology or recordkeeping is not determinative of deposit insurance coverage.

"There will be many other questions related to tokenized deposits from market participants beyond the clarification in the proposal," Hill said, encouraging comments on what additional clarity the FDIC should consider.

The Treasury Department separately proposed rules on April 3 establishing broad-based principles for determining whether state-level stablecoin regulatory regimes are "substantially similar" to the federal framework. Under the GENIUS Act, state-qualified PPSIs with less than $10 billion in outstanding issuance may opt for state regulation if their home state's regime meets that standard. Comments on the Treasury proposal are due June 2.

The GENIUS Act takes effect on the earlier of Jan. 18, 2027, or 120 days after final rules are issued. Most implementing regulations must be finalized by July 18, 2026.

This article is for informational purposes only and does not constitute investment advice.