FDIC Advances Stablecoin Oversight Framework Under GENIUS Act With New Prudential Rule Proposal

The Federal Deposit Insurance Corporation (FDIC) has taken a significant step in the oversight of dollar-pegged digital assets by introducing a new regulatory framework under the GENIUS Act. This framework defines how U.S. banks and their subsidiaries may issue and manage stablecoins, a crucial development in the regulation of digital currencies.

The proposed rule, approved on April 7, outlines requirements for “permitted payment stablecoin issuers” (PPSIs), which are expected to operate as subsidiaries of FDIC-supervised institutions. The framework covers various aspects such as reserves, redemption practices, capital, liquidity, cybersecurity, and risk management. It is currently open for a 60-day public comment period.

The GENIUS Act, officially known as the Guiding and Establishing National Innovation for U.S. Stablecoins Act, directs federal banking regulators to establish a unified system for regulating stablecoin issuance in the United States. Under the FDIC’s framework, issuers must maintain full backing of stablecoins on a 1:1 basis with eligible reserve assets.

These reserves, which include U.S. currency, balances at Federal Reserve Banks, insured bank deposits, short-term U.S. Treasury securities, and certain overnight repurchase agreements, must be monitored daily and kept separate from other business activities. The proposal also imposes concentration limits on reserve holdings and restricts exposure to counterparties to ensure stability and liquidity.

Redemption standards are a key component of the rule, with issuers required to publish clear redemption policies and process redemption requests within two business days. In cases of large withdrawals exceeding 10% of outstanding issuance within 24 hours, issuers must notify regulators and may request extensions.

The FDIC’s framework also introduces capital requirements for issuers, with new PPSIs mandated to hold a minimum of $5 million in capital for their first three years of operation. Additional capital requirements may be imposed based on supervisory assessment. Issuers must also maintain a separate liquidity buffer equivalent to 12 months of operating expenses.

Cybersecurity and operational resilience are addressed in the proposal, with issuers required to maintain systems for private-key management, blockchain monitoring, incident response, and independent audits. Annual compliance certifications related to anti-money laundering and counter-terrorist financing programs are also mandatory.

It is important to note that stablecoins issued under this framework will not receive deposit insurance protections under the standard $250,000 coverage limit. Reserves held at insured institutions will be treated as corporate deposits of the issuer, not individual stablecoin holders. However, tokenized deposits meeting the legal definition of a bank deposit will receive standard deposit insurance treatment regardless of the technological format used.

The FDIC’s action follows earlier implementation efforts tied to the GENIUS Act and aligns with rulemaking from other banking regulators, such as the Office of the Comptroller of the Currency. The proposal is expected to undergo revisions following the public comment process before final adoption, with a statutory deadline for implementation by mid-2026 under the GENIUS Act. This places pressure on regulators to finalize a unified stablecoin framework in the coming months.