US Moves Forward With GENIUS Act As FDIC Proposes Detailed Rules For Payment Stablecoin Issuers

FDIC Seeks Public Input On Rules For Stablecoin Issuers Under GENIUS Act

The Federal Deposit Insurance Corporation (FDIC) has released a detailed proposal setting regulatory standards for payment stablecoin issuers, following the enactment of the GENIUS Act last year by President Donald Trump.

The agency is now inviting public comment over a 60-day period, seeking feedback on 144 specific questions regarding reserve management, redemptions, and risk controls.

Who Will Be Regulated And How

The proposed rule applies to permitted payment stablecoin issuers (PPSIs), generally subsidiaries of FDIC-supervised banks or state-chartered institutions authorised to issue stablecoins.

These entities would be required to hold reserves that fully back outstanding coins on a 1:1 basis, using only eligible, highly liquid assets such as U.S. currency, balances at Federal Reserve Banks, short-term Treasury securities, and certain money market funds.

Exposure to any single custodian would be limited to 40% of total reserves.

The rule clarifies that reserves backing stablecoins are corporate deposits of the issuer and do not provide pass-through FDIC insurance to token holders.

Eugene Frenkel, FDIC FinTech Counsel, explained during the board meeting:

“Payment stablecoins are not backed by the full faith and credit of the United States and are not subject to federal deposit insurance.”

How Redemptions And Operations Will Be Managed

Issuers would be required to publicly post a redemption policy and generally complete redemptions within two business days.

For redemptions exceeding 10% of outstanding tokens in any 24-hour period, the FDIC may allow an extension, provided the issuer notifies the agency.

On operational resilience, PPSIs must maintain robust risk management systems, including internal controls, audits, and IT safeguards covering smart contract oversight, blockchain monitoring, and private-key management.

Capital requirements include a minimum of $5 million during the first three years of operation, with ongoing capital adjusted to match the risk profile of the issuer.

An operational backstop of highly liquid assets covering 12 months of projected expenses is also mandated.

Tokenized Deposits Will Retain Traditional Protections

While stablecoins themselves are excluded from deposit insurance, tokenized deposits meeting the Federal Deposit Insurance Act’s definition of “deposit” will receive standard treatment.

FDIC Chair Travis Hill highlighted this during the board meeting:

“Tokenized deposits are deposits—and this treatment is not changed by the fact that they are tokenized.”

Alignment With Other Regulators And Ongoing Oversight

The FDIC’s proposal complements existing guidance from the Office of the Comptroller of the Currency (OCC) and the Treasury Department, which is also seeking public input on state-level oversight for smaller stablecoin issuers.

Chair Hill pointed to rapid sector growth over the past two years:

“As a result, development of stablecoin and tokenized deposit products continues to advance, and use cases continue to multiply.”

The FDIC plans to publish the proposed rule in the Federal Register, opening a 60-day window for public comment.

The GENIUS Act takes general effect no later than 18 January 2027 or 120 days after the finalisation of federal regulations, whichever comes first.