Stablecoins Get Their Report Card: FDIC Opens Comment Period on GENIUS Act Rules

The U.S. Federal Deposit Insurance Corp. has formally proposed its approach to stablecoin issuers, joining the ranks of federal financial regulators tasked with writing and overseeing rules under last year's Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. Because nothing says "innovation" quite like three-letter acronyms and a 144-question homework assignment from the government.

The FDIC's proposal aligns closely with what its sister banking agency, the Office of the Comptroller of the Currency, proposed in February. The plan will be open for a 60-day public comment period, featuring a lengthy list of 144 questions for the public to weigh in on. That's right, degens—your chance to tell the FDIC whether they got it right. Or at least whether they got it less wrong than the last batch of banking regs that tried to explain DeFi to compliance officers.

The FDIC's mandate under the GENIUS Act focuses on regulating U.S. depository institutions that issue stablecoins through their subsidiaries. To that end, the agency has proposed capital, liquidity, and custody standards for these firms. However, these details won't be finalized until the agency spends additional months reviewing input and drafting the final language. Translation: we're all just commenting on a rough draft of history while the lawyers figure out what "custody" actually means in 2025.

This marks the second GENIUS Act proposal from the banking agency, following its December pitch on the issuer application process. For those keeping score at home, that's two proposals down and presumably several more regulatory love letters to go before this thing actually becomes law. The speed of bureaucracy: only slightly faster than a Bitcoin block during a congestion spike.

As expected under the law, stablecoins won't enjoy the deposit insurance that banks maintain on traditional banking accounts, according to the proposal. Your $USDC isn't getting that sweet FDIC sticker of approval—no $250,000 safety net for your algorithmic dreams. This is the financial equivalent of telling someone they're old enough to vote but not old enough to rent a car.

The OCC's earlier proposal included a section that raised initial concern among crypto policy experts regarding how the agency would handle rewards programs managed by third-party stablecoin relationships, such as exchanges. Similarly, the FDIC stated that issuers wouldn't be able to represent that their tokens pay interest or yield "simply for holding or using a payment stablecoin," including via arrangements with third parties. That said, crypto insiders have grown comfortable that properly tailored rewards programs shouldn't run afoul of the rules. So yes, you can still get your rewards—just don't call it yield, don't call it interest, and for the love of all that is holy, don't call it a security. Call it... "loyalty appreciation tokens" or something.

The FDIC's proposal also outlined the capital that 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. Nothing says "innovation" like basing your regulatory framework on last year's burn rate. It's like regulating a rocket ship by looking at how much fuel the bicycle had.

The agency further addressed "the applicability of pass-through insurance to deposits held as reserves backing payment stablecoins," proposing that "tokenized deposits that satisfy the statutory definition of 'deposit' would be treated no differently" than other deposits. In plain English: if it's a deposit under the law, it's a deposit. Shocking, we know.

While regulators work to implement GENIUS, some details could potentially be overhauled by the Senate's Digital Asset Market Clarity Act. A clash between banking and crypto industries over yield-bearing stablecoin holdings has turned into a months-long debate, with lawmakers claiming they're close to resolving it—though the bill hasn't yet advanced to a needed hearing. Congressional "we're close" translate to "maybe by Q3 2027" in normal human time.

Congress returns from break later this week. So expect absolutely nothing to happen until at least Friday, and even then, probably not.

The OCC, FDIC, and other agencies involved in implementing the rule—including the Treasury Department and markets regulators—have few impediments in crafting regulations the way Republican appointees want it. President Donald Trump's White House has broken with past practice and declined to name any Democrat appointees to the many vacancies across agencies, leaving no Democrats to raise objections to regulatory language. The regulatory playground has fewer swings than usual, and only one kid gets to decide how high everyone goes.

Despite this, the GENIUS Act itself drew significant bipartisan support in both chambers of Congress when passed into law. Even politicians who can't agree on what day it is managed to agree that stablecoins needed rules. Sometimes Washington works—or at least pretends to.