FDIC Cracks Down on Stablecoin Insurance Loophole
The Federal Deposit Insurance Corp. (FDIC) is proposing a rule to bar stablecoin holders from accessing deposit insurance through a back door.
Stablecoins, such as Circle's USDC and Tether's USDT, are not eligible for direct FDIC coverage under the GENIUS Act, which distinguishes them from bank deposits that carry up to $250,000 in federal guarantees.
However, the statute was silent on whether third-party financial firms could obtain protection on holders' behalf. The proposed rule would shut this potential loophole by prohibiting pass-through insurance for stablecoin users.
FDIC Chairman Travis Hill stated that the move aligns with the intent of the GENIUS Act, which does not address pass-through arrangements explicitly. He noted that current rules require end-customer identities to be readily ascertainable, a standard not commonly met by large stablecoin arrangements today.