GENIUS Act Gets Real: FDIC Drops Its Second Stablecoin Rule Proposal

The Federal Deposit Insurance Corp. has formally proposed its approach to regulating stablecoin issuers under last year's Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act — marking the agency's second crack at implementation rules. Because apparently the first attempt wasn't quite spicy enough for the degens.

The proposal, meant to align closely with what the Office of the Comptroller of the Currency proposed in February, will face a 60-day public comment period featuring 144 questions from the agency. It covers capital, liquidity and custody standards for firms issuing stablecoins from their subsidiaries, though these details won't be finalized until the agency reviews input and writes the final language. That's right, folks — another round of "please sir, may I have some regulatory clarity?" with a side of 144 interrogatives.

As expected under the law, stablecoins won't enjoy the deposit insurance that banks maintain on traditional accounts. The FDIC also clarified that issuers can't represent their tokens pay interest or yield simply for holding or using a payment stablecoin — including via arrangements with third parties. However, crypto insiders have grown comfortable that properly tailored rewards programs shouldn't run afoul of the rules. Translation: you still can't call it yield, but maybe you can call it a "loyalty bonus" and sleep soundly at night.

The proposal suggested the capital issuers will need to maintain to manage business risk, plus an operational backstop separate from the capital requirement based on the previous year's operating expenses. The agency also addressed pass-through insurance for deposits held as reserves backing payment stablecoins, proposing that tokenized deposits satisfying the statutory definition of deposit would be treated no differently than other deposits. Basically, regulators are trying to make sure your $USDT isn't just a fancy IOU with extra steps.

This arrives as the Senate discusses potential changes to the law's treatment of stablecoin yield, with the Digital Asset Market Clarity Act potentially overhauling some GENIUS Act details. The banking and crypto industries have been clashing over yield-bearing stablecoin holdings in a months-long debate that lawmakers say they're close to resolving. The old guard versus the chain brigade — watching banks try to understand why anyone would want stablecoins to actually earn something is genuinely entertaining.

With no Democrat appointees across the regulatory agencies due to the White House breaking with past practice, there are no Democrats to raise objections to the regulatory language as the OCC, FDIC, Treasury and markets regulators craft regulations the way Republican appointees want. Nothing like a bipartisan-free regulatory zone to really get those innovation juices flowing.