FDIC to Launch US Stablecoin Regulation Framework This Month, Says Acting Chair

FDIC to Launch US Stablecoin Regulation Framework This Month, Says Acting Chair

The Federal Deposit Insurance Corporation (FDIC) is set to announce a formal regulatory framework for US stablecoins later this month, as confirmed by acting chair Travis Hill.

Key Takeaways:

The FDIC will release its inaugural US stablecoin regulation framework this month.
The recently enacted GENIUS Act designates the FDIC as the primary regulator for stablecoins issued by banks, while other agencies will oversee different market segments.
New guidelines regarding capital, liquidity, and reserves will accompany rules about tokenized deposits.

In a prepared statement for a hearing with the House Financial Services Committee, Hill mentioned that the agency has started formulating regulations to implement the law. He anticipates publishing a proposal that clarifies how stablecoin issuers can apply for approval.

Additionally, he indicated a forthcoming separate proposal that will outline prudential standards for issuers under FDIC supervision, expected to be released in early next year.

GENIUS Act Assigns FDIC Oversight of Bank-Issued Stablecoins

The GENIUS Act, which President Donald Trump signed into law in July, established a multi-agency oversight framework for stablecoins backed by the dollar.

According to the law, the FDIC will oversee stablecoin-issuing subsidiaries within banks and corporations it currently regulates, while other regulatory bodies will manage different areas of the market.

Hill emphasized that the FDIC's responsibilities will extend beyond basic documentation. The agency will define capital requirements, liquidity protocols, and diversification standards for reserve assets. These measures will ensure issuers can adequately handle redemptions, even amid market volatility.

As with other federal regulators, the FDIC will invite public comments on its proposal before finalizing it. This process often extends for several months as agencies consider industry feedback and make necessary adjustments.

The Treasury Department has already begun its actions in alignment with the law.

Officials started implementation processes for the GENIUS Act in August and have recently concluded a second round of public consultations regarding the supervision of non-bank issuers. This creates a parallel regulatory pathway that will influence the entirety of the US stablecoin environment.

Hill also announced that the FDIC is developing guidance related to tokenized deposits, echoing earlier recommendations from the President’s Working Group on Digital Asset Markets published in July.

This report urged regulators to clarify which blockchain-based activities banks can engage in, including the issuance of digital representations of deposits.

Hill noted that the FDIC is preparing guidance to clarify how tokenized deposits should be treated according to existing banking regulations, a subject that has gained increasing interest from banks exploring blockchain technology for transactions and settlements.

Federal Reserve Joins the Regulatory Effort

The Federal Reserve is also collaborating with other regulatory bodies on establishing the rules for stablecoins.

During the same hearing, Vice Chair of Supervision Michelle Bowman remarked that the central bank is working with its peers to establish capital and liquidity standards aimed at integrating the stablecoin sector into the traditional financial system.

Bowman highlighted the importance of regulatory clarity surrounding not only what banks can do with digital assets but also how regulators should respond to the emergence of new use cases.

Representatives from the Office of the Comptroller of the Currency and the National Credit Union Administration are also expected to provide testimony, underscoring the broad impact that these new regulations will have on the oversight of digital currencies in the US.