FDIC Seeks to Close Stablecoin Insurance Loophole in Proposed Rule

The Federal Deposit Insurance Corp (FDIC) is proposing a rule to bar stablecoin holders from receiving deposit insurance, even through third-party financial firms. This move aims to close a potential loophole in the GENIUS Act, which already bans direct FDIC coverage for stablecoins.

Currently, large stablecoin arrangements often fail to meet the requirement of end-customer identities being readily ascertainable, as per current pass-through rules. The proposed rule would shut this door and align with the intent of the GENIUS Act, which distinguishes stablecoins from bank deposits that carry up to $250,000 in federal guarantees.

The FDIC's preliminary view is also that tokenized deposits, bank deposits represented as programmable blockchain tokens, should receive the same insurance treatment as conventional deposits. This proposal arrives as concern over stablecoin competition intensifies, with a Jefferies report estimating stablecoin growth could generate 3% to 5% core deposit runoff at U.S. banks over five years.