In a significant development, the US Federal Deposit Insurance Corporation has formally proposed its approach to regulating stablecoin issuers, as required by the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act. The proposed rule will be open for public comment for 60 days, during which time the agency will seek input on 144 questions.
The FDIC's proposal aims to align with the approach taken by the Office of the Comptroller of the Currency, and will regulate depository institutions that issue stablecoins through their subsidiaries. The proposal sets out capital, liquidity, and custody standards for these firms, although the details will not be finalized until the agency has reviewed the comments and written the final language. As expected, stablecoins will not be eligible for deposit insurance, and issuers will not be allowed to represent that their tokens pay interest or yield simply for holding or using a payment stablecoin. The FDIC's proposal also suggests that issuers will need to maintain capital to manage the risk of the business, as well as an operational backstop.
The agency has also addressed the applicability of pass-through insurance to deposits held as reserves backing payment stablecoins, proposing that tokenized deposits will be treated no differently than other deposits. While the regulators work to implement the GENIUS Act, lawmakers are also working on the Digital Asset Market Clarity Act, which could potentially overhaul some of the details of the GENIUS Act. The OCC, FDIC, and other agencies involved in implementing the rule have significant flexibility to craft regulations as they see fit, due to the lack of Democratic appointees to raise objections.