FDIC Launches Stablecoin Application Framework, Spurring Bank Innovation

The U.S. Federal Deposit Insurance Corporation (FDIC) has taken a major step in implementing the GENIUS Act by proposing a formal application process for banks to issue payment stablecoins through a subsidiary. The proposal, approved by the FDIC's board on December 16, introduces a tailored framework for evaluating the safety and soundness of such activities while minimizing regulatory burden on applicants according to the FDIC's rulemaking. The new rulemaking is the first significant action under the GeniUS Act, which was signed into law by President Donald Trump in July 2025 as reported by CoinDesk. The FDIC has opened a 60-day public comment period to gather feedback before finalizing the rule.

Under the proposed process, FDIC-supervised banks must apply to the FDIC to issue payment stablecoins through a subsidiary. According to Cointelegraph, the applications will be evaluated based on factors such as financial soundness, management quality, and compliance with redemption and reserve requirements. The FDIC will have 30 days to determine if an application is complete and 120 days to approve or deny it. If the FDIC does not make a decision within the timeframe, the application is automatically approved according to the FDIC's proposal. The proposal also includes a mechanism for applicants to appeal denied applications.

Acting FDIC Chair Travis Hill emphasized that the tailored application process aims to support responsible growth and innovation in digital assets while ensuring safety and soundness according to Seeking Alpha. The proposal aligns with the GeniUS Act's goal of creating a stablecoin framework that promotes financial stability and consumer protection. According to CryptoNewz, once approved, the subsidiary will be designated as a permitted payment stablecoin issuer and fall under FDIC supervision. The FDIC also plans to issue another proposal in early 2026 to establish capital, liquidity, and risk management requirements for stablecoin issuers as reported by CryptoBriefing.

Implications for Market Participants

The proposed rule has significant implications for U.S. banks and financial institutions looking to enter the stablecoin market. By setting clear regulatory expectations, the FDIC is providing a pathway for banks to issue dollar-backed stablecoins in a structured and supervised environment according to Bloomberg. This move is expected to enhance market transparency and investor confidence, particularly in how reserves are managed and redemptions are processed. According to Coinotag, the requirement for stablecoins to be fully backed by high-quality liquid assets—such as U.S. dollars or short-term Treasuries—ensures that issuers can maintain solvency and meet obligations. Additionally, the prohibition of asset reuse or rehypothecation reinforces the integrity of the backing system.

The proposal also includes safeguards for governance and compliance. According to Bitcoinist, applicants must disclose detailed ownership structures, leadership backgrounds, and policies related to customer agreements. Leadership must demonstrate a clean record, with no convictions for financial crimes such as money laundering or fraud. These measures aim to prevent conflicts of interest and ensure responsible management of stablecoin activities. Furthermore, according to the FDIC, the proposal mandates that stablecoin issuers provide clear redemption policies, including notice periods for any changes in fees or terms.

Next Steps and Market Reactions

The FDIC's proposal marks a pivotal transition from legislative intent to regulatory implementation for stablecoins. The next phase, expected in early 2026, will involve the introduction of prudential standards such as capital and liquidity requirements for approved stablecoin issuers according to Cointelegraph. These rules will provide further clarity and ensure that stablecoin operations meet the same rigorous standards as traditional banking activities. The FDIC has also signaled its intent to continue exploring ways to provide regulatory clarity for digital assets and tokenized deposits.

Market reactions have been mixed, with some analysts praising the FDIC's proactive approach while others caution about potential delays in broader crypto regulatory efforts. For instance, the Senate Banking Committee recently postponed consideration of the Digital Asset Market CLARITY Act, a comprehensive bill that aims to resolve longstanding disputes over crypto regulation. This delay may impact the broader regulatory landscape, including how stablecoins interact with other digital assets. However, the FDIC's move provides a solid foundation for the stablecoin sector, which is likely to see increased participation from banks and fintechs in the coming years.