Stablecoin Issuers Face New FDIC Proposal on Capital and Liquidity Rules

TLDR

• The FDIC has proposed new regulations for stablecoin issuers under the GENIUS Act.
• The proposal includes capital, liquidity, and custody standards for stablecoin issuers.
• Stablecoins will not be eligible for the same deposit insurance as traditional bank accounts.
• Issuers will need to maintain capital to manage risks and an operational backstop based on previous expenses.
• The FDIC’s rules will not allow stablecoins to offer interest or yield simply for holding them.
• The FDIC is seeking public feedback through a 60-day comment period before finalizing the regulations.

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The U.S. Federal Deposit Insurance Corporation (FDIC) has proposed new regulations for stablecoin issuers. This proposal aims to align with the Office of the Comptroller of the Currency’s (OCC) framework. The rules are part of the ongoing effort under the 2022 Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act.

The FDIC’s approach focuses on capital, liquidity, and custody standards for depository institutions issuing stablecoins. These regulations come after a previous proposal from the OCC in February. The proposal also addresses key issues such as pass-through insurance and interest-bearing stablecoins.

FDIC Proposes New Standards for Stablecoin Issuers

The FDIC’s latest proposal introduces new standards for stablecoin issuers to comply with. It sets guidelines for capital requirements, ensuring issuers maintain sufficient resources to manage business risks. Issuers will also be required to provide an operational backstop based on their previous year’s operating expenses.

Under the new rules, stablecoins will not qualify for the same deposit insurance offered by traditional banks. This distinction clarifies that stablecoins do not enjoy the same protections as consumer deposits. This proposal mirrors the earlier framework put forward by the OCC, with some additional clarifications.

While the FDIC’s rules are still in the early stages, the agency is seeking feedback from industry stakeholders. A 60-day public comment period will allow issuers and crypto policy experts to provide input. After reviewing the comments, the FDIC plans to finalize its regulations, which could take several months.

Regulatory Clarity on Tokenized Deposits and Rewards Programs

The FDIC also addressed the issue of tokenized deposits, proposing that such deposits, if they meet the statutory definition of “deposit,” be treated the same as traditional deposits. This means tokenized assets could be eligible for pass-through insurance, a concept that might provide issuers with additional flexibility.

Another key point in the proposal is the restriction on yield-bearing stablecoins. According to the FDIC, issuers will not be able to offer interest or yield just for holding or using a payment stablecoin. The agency emphasized that third-party rewards programs linked to stablecoins must be carefully structured to avoid violations of these rules.

The FDIC has been working in collaboration with other federal agencies, including the Treasury Department and market regulators, to finalize the GENIUS Act’s implementation. As a result, these proposals could significantly shape the future of stablecoin regulations in the United States.

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