FDIC Unveils Bank-Friendly Stablecoin Framework to Spur Digital Asset Growth

The U.S. Federal Deposit Insurance Corporation (FDIC) has taken a major step in implementing the GENIUS Act by proposing a formal application framework for banks to issue payment stablecoins through subsidiaries. The proposed rule, approved by the FDIC's board, outlines a streamlined process for evaluating the safety and soundness of stablecoin activities while minimizing regulatory burden for applicants. The agency is now seeking public comment on the proposal, with a 60-day window for feedback.

Under the proposal, applicants must detail proposed activities, describe the ownership and control structure of the subsidiary, and include an engagement letter with a registered public accounting firm. The rule also allows for a 120-day approval process and provides an appeal mechanism for rejected applications. The FDIC emphasized that this tailored approach supports responsible growth in digital assets while ensuring regulatory oversight.

The FDIC's move comes as part of broader efforts to implement the GENIUS Act, signed into law in July by President Donald Trump. The law mandates that stablecoins be fully backed by U.S. dollars or similar liquid assets and requires regular audits for large issuers. Acting FDIC Chair Travis Hill has indicated that the agency plans to release additional rules on capital, liquidity, and risk management for approved stablecoin issuers in the coming months.

Implications for the Stablecoin Market

The FDIC's proposal signals a shift in how stablecoins will be regulated in the U.S., with banks playing a central role in their issuance. By allowing banks to create subsidiaries for stablecoin operations, the rule could help integrate digital assets more seamlessly into the traditional financial system. This move aligns with the goals of the GENIUS Act, which aims to establish a clear and consistent regulatory framework for stablecoins while promoting innovation and consumer protection.

For existing stablecoin issuers, such as Tether and Circle, the proposal means they may need to partner with FDIC-supervised banks or establish their own bank subsidiaries to comply with the new rules. This could lead to greater institutional confidence in stablecoins, as their reserves would be subject to stricter oversight and transparency requirements.

Market and Regulatory Considerations

The FDIC's rulemaking is part of a broader regulatory push across the U.S. banking system. The Office of the Comptroller of the Currency (OCC) has already granted conditional national trust bank charters to five digital-asset firms, signaling federal acceptance of stablecoin activities. Meanwhile, the Federal Reserve is expected to collaborate with other regulators on capital and liquidity standards for stablecoin issuers, as required by the GENIUS Act.

The proposed FDIC framework also highlights the importance of reserve requirements under the GENIUS Act, which mandates that stablecoins be 1:1 backed by permitted assets like U.S. dollars, demand deposits, or short-term Treasurys. These rules aim to prevent the kind of collapses seen in algorithmic stablecoins and ensure that payment stablecoins remain a reliable medium of exchange.

Next Steps and Investor Considerations

The FDIC's proposal is not final and will undergo a public comment period before being finalized. Once implemented, it will be followed by additional rules on capital and liquidity requirements for stablecoin subsidiaries. Investors and market participants are advised to monitor these developments, as they will shape the future of the stablecoin market in the U.S.

For now, stablecoin users should understand that the FDIC does not insure stablecoins directly. Instead, the insurance applies to the traditional deposit accounts at the bank, not the stablecoins themselves. As the regulatory landscape continues to evolve, users may want to evaluate how existing issuers adapt to the new requirements and consider the long-term implications for stablecoin adoption and trust.