FDIC Targets Stablecoin Insurance Loopholes in GENIUS Act Implementation
The Federal Deposit Insurance Corporation (FDIC) plans to propose a rule that would explicitly ban stablecoin holders from receiving pass-through insurance, even through third-party financial firms. The move comes as part of the implementation of the GENIUS Act, which already distinguishes stablecoins from bank deposits by excluding them from federal guarantees.
FDIC Chairman Travis Hill said that the proposed rule aims to align with the intent of the GENIUS Act, despite its silence on the issue. He noted that current pass-through rules require end-customer identities to be readily ascertainable, a standard not commonly met by large stablecoin arrangements.
The FDIC's proposal also includes a preliminary view that tokenized deposits, bank deposits represented as programmable blockchain tokens, should receive the same insurance treatment as conventional deposits. This could have significant implications for the banking sector, which has expressed concerns over stablecoin competition and potential deposit runoff.
A Jefferies report estimates that stablecoin growth could generate 3% to 5% core deposit runoff at U.S. banks over five years, cutting average bank earnings by roughly 3%. The FDIC's comment period for the GENIUS Act runs until May 18, 2026, with final rules due July 18.