FDIC Proposes to Clarify That Stablecoin Holders Are Not Entitled to Deposit Insurance

On June 9, PYMNTS reports that the Federal Deposit Insurance Corporation (FDIC) has issued a notice of proposed rulemaking to implement the GENIUS Act. The proposal clarifies that payment stablecoins themselves do not qualify as deposits for FDIC insurance purposes, meaning stablecoin holders are not entitled to FDIC deposit insurance coverage. Under the framework, if a stablecoin’s reserve assets are held at a bank, those reserves will be treated as corporate deposits belonging to the stablecoin issuer—and thus insured as such—rather than extending pass-through insurance directly to stablecoin holders. The FDIC states this structure aligns with the GENIUS Act’s explicit provision that payment stablecoins are not covered by FDIC deposit insurance. The proposal also addresses additional key areas for stablecoins, including interoperability, reporting standards, user incentive mechanisms, and reserve custody and redemption rules. Some banking institutions have called for banning stablecoin issuers from attracting funds through interest payments, cashback offers, or rewards to prevent traditional bank deposits from migrating into the stablecoin ecosystem. The FDIC’s proposal further requires issuers to hold high-liquidity reserve assets, limit the share of reserves held at any single financial institution to no more than 40%, and enforce stricter rules for asset segregation, custody controls, and redemption management.