FDIC Advances Stablecoin Oversight Framework Under GENIUS Act With New Prudential Rule Proposal

The Federal Deposit Insurance Corporation (FDIC) has advanced a new regulatory framework that begins to define how U.S. banks and their subsidiaries may issue and manage stablecoins under the GENIUS Act, marking a significant step in the federal oversight of dollar-pegged digital assets.

In a proposed rule approved on April 7, the FDIC outlined requirements for “permitted payment stablecoin issuers” (PPSIs), which are expected to operate as subsidiaries of FDIC-supervised institutions. The framework sets standards for reserves, redemption practices, capital, liquidity, cybersecurity, and risk management, and is now open to a 60-day public comment period.

The proposal implements provisions of the GENIUS Act, formally known as the Guiding and Establishing National Innovation for U.S. Stablecoins Act, which directs federal banking regulators to create a unified system for regulating stablecoin issuance in the United States.

Under the FDIC’s framework, issuers would be required to maintain full backing of stablecoins on a 1:1 basis with eligible reserve assets. These reserves must be monitored daily and held separately from other business activities. Eligible assets include U.S. currency, balances held at Federal Reserve Banks, insured bank deposits, short-term U.S. Treasury securities, and certain overnight repurchase agreements.

The proposal also sets concentration limits on reserve holdings and restricts exposure to counterparties. The FDIC said eligible reserve assets must remain highly liquid and low risk to ensure redemption capacity during periods of stress.

Redemption standards form a central component of the rule. Issuers would be required to publish clear redemption policies and generally process redemption requests within two business days. In cases where large withdrawals exceed 10% of outstanding issuance within a 24-hour period, issuers must notify regulators and may request extensions.

Bitcoins FDIC’s capital liquidity cybersecurity framework

FDIC Chair Travis Hill said in prepared remarks that the framework is intended to address operational risk and financial stability concerns as stablecoin usage expands in payments infrastructure.

The proposal also introduces capital requirements for issuers. New PPSIs would be required to hold a minimum of $5 million in capital for their first three years of operation, with additional requirements possible based on supervisory assessment. Ongoing capital must consist primarily of common equity tier 1 and additional tier 1 instruments.

In addition, issuers would need to maintain a separate liquidity buffer equal to 12 months of operating expenses. The FDIC described this buffer as distinct from reserve requirements backing issued stablecoins.

The rule addresses cybersecurity and operational resilience, requiring issuers to maintain systems covering private-key management, blockchain monitoring, incident response, and independent audits. Annual compliance certifications related to anti-money laundering and counter-terrorist financing programs are also required.

The FDIC clarified that stablecoins issued under this framework would not receive deposit insurance protections under the standard $250,000 coverage limit. Reserves held at insured institutions would be treated as corporate deposits of the issuer, not individual stablecoin holders.

However, the proposal states that tokenized deposits that meet the legal definition of a bank deposit would receive standard deposit insurance treatment regardless of the technological format used.

The FDIC’s action follows earlier implementation efforts tied to the GENIUS Act and comes alongside parallel rulemaking from other banking regulators, including the Office of the Comptroller of the Currency.

The proposal is expected to be revised following the public comment process before final adoption. The GENIUS Act sets a statutory deadline for implementation by mid-2026, placing pressure on regulators to finalize a unified stablecoin framework in the coming months.

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