FDIC Cracks Down on Stablecoin Insurance Loopholes

The Federal Deposit Insurance Corp. (FDIC) is taking steps to ensure that stablecoin holders do not receive deposit insurance, even through indirect means. FDIC Chairman Travis Hill announced plans to propose a rule explicitly barring stablecoin holders from 'pass-through' insurance.

The proposed rule aims to close a potential loophole in the GENIUS Act, which already bans direct FDIC coverage for stablecoins but is silent on whether third-party financial firms could obtain protection on behalf of stablecoin holders. Hill noted that the pass-through prohibition aligns with the intent of the GENIUS Act.

Hill also stated that the FDIC's preliminary view is 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. The proposed rule comes as banking-sector concern over stablecoin competition is intensifying.