FDIC Approves Proposed Rule Allowing Banks to Issue Payment Stablecoins via Subsidiaries Under GENIUS Act
The Federal Deposit Insurance Corporation (FDIC) has approved a proposed rule implementing the GENIUS Act, which permits FDIC-supervised banks to issue payment stablecoins through separately capitalized subsidiaries. Direct issuance on a bank's balance sheet is not allowed under this rule.
Eligible institutions include state-chartered banks and state savings associations supervised by the FDIC. These issuers must operate via a prior-approved subsidiary, designated as Permitted Payment Stablecoin Issuers.
A payment stablecoin is defined as a digital asset used for payments or settlement that is backed 1:1 by cash or highly liquid assets. These stablecoins are neither deposits, legal tender, nor securities.
Applications to become permitted issuers must disclose detailed information including subsidiary structure, stablecoin design, reserve composition, liquidity, capital, governance, redemption policies, and ownership/control. Key personnel with histories of serious financial crimes are disqualifying.
Reserves must be fully backed 1:1, with established policies for reserve management and asset segregation. An independent public accounting firm is required to perform monthly attestations of reserves.
Issuers must have clear redemption processes and disclose any fees involved. They are also required to provide information on governance and arrangements with third-party service providers.
The regulatory timeline specifies 30 days to determine the substantial completeness of applications and 120 days to approve or deny. If regulators do not act within 120 days, the application is approved by operation of law. Denials require a rationale based on safety and soundness concerns, and an appeals process is available.
A temporary safe harbor allows early applicants to seek waivers of GENIUS Act requirements for up to 12 months. Public comments on the proposal will be accepted for 60 days following publication in the Federal Register.
This move aligns with a broader regulatory shift, including the Office of the Comptroller of the Currency enabling riskless principal crypto transactions and the Department of the Treasury overseeing GENIUS Act activities for non-bank issuers.
