FDIC Cracks Down on Stablecoin Pass-Through Insurance

The Federal Deposit Insurance Corporation (FDIC) is set to propose a rule that would explicitly bar stablecoin holders from receiving deposit insurance, even if it's obtained through third-party financial firms.

This move comes as part of the implementation of the GENIUS Act, which already distinguishes stablecoins from bank deposits and does not provide federal guarantees for them. However, the statute was silent on whether pass-through insurance could be used to circumvent this rule.

FDIC Chairman Travis Hill stated that the proposed rule aims to align with the intent of the GENIUS Act, even though it doesn't explicitly address the arrangement. He noted that current pass-through rules require end-customer identities to be readily ascertainable, a standard not commonly met by large stablecoin arrangements today.

Hill also mentioned 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.