FDIC Blocks Stablecoin Users from Indirect Deposit Insurance

The Federal Deposit Insurance Corp. (FDIC) is taking steps to prevent stablecoin users from accessing deposit insurance, even through indirect means. FDIC Chairman Travis Hill announced that the agency will propose a rule explicitly barring stablecoin holders from 'pass-through' insurance.

Hill made the remarks at an American Bankers Association summit in Washington as federal agencies continue rolling out GENIUS Act implementation rules. The GENIUS Act already bans direct FDIC coverage for stablecoins, but was silent on whether third-party financial firms could obtain that protection on holders' behalf.

The proposed rule aims to close a potential loophole in the GENIUS Act, which distinguishes stablecoins from bank deposits that carry up to $250,000 in federal guarantees. Hill noted that current pass-through rules require end-customer identities to be readily ascertainable, a standard not commonly met by large stablecoin arrangements today.

The FDIC's preliminary view is also that tokenized deposits - bank deposits represented as programmable blockchain tokens, which the GENIUS Act does not cover - should receive the same insurance treatment as conventional deposits. This development comes as banking-sector concern over stablecoin competition is intensifying, with a Jefferies report estimating that stablecoin growth could generate 3% to 5% core deposit runoff at U.S. banks over five years.