FDIC Sets New Application Process for Banks Seeking to Issue Stablecoins

TLDR

• FDIC sets new rule for stablecoin issuance by approved banks under GENIUS Act.
• Banks must apply to FDIC for stablecoin issuance approval under new rule.
• GENIUS Act mandates stablecoins be fully backed by U.S. dollars, ensuring safety.
• FDIC introduces clear application process and timelines for stablecoin issuers.
• FDIC’s proactive move safeguards financial stability while promoting innovation.

The Federal Deposit Insurance Corporation (FDIC) has approved a new rule under the GENIUS Act to regulate stablecoin issuance by FDIC-supervised banks. This new rule introduces a structured application process for institutions seeking approval to issue payment stablecoins through subsidiaries. The move aims to ensure that these banks meet financial soundness, regulatory compliance, and safety standards while minimizing regulatory burdens.

Application Process for Stablecoin Issuance

Under the new proposal, FDIC-supervised banks must submit an application to the FDIC for approval before issuing stablecoins through a subsidiary. The application must include detailed information about the subsidiary’s ownership structure and control, as well as a description of the proposed stablecoin activities. Additionally, institutions must provide engagement letters with registered public accounting firms, which will assist in verifying financial stability and regulatory adherence.

The FDIC will evaluate each application based on several factors, including the subsidiary’s financial soundness and its ability to comply with regulatory requirements. The agency has set clear timelines for processing these applications. It has 30 days to assess the completeness of an application and 120 days to approve or deny it. If a request is denied, the FDIC will issue a written explanation and allow the applicant to appeal.

GENIUS Act Framework and Regulatory Requirements

The new rule stems from the GENIUS Act, which was signed into law earlier this year to create a regulatory framework for stablecoins in the United States. This law mandates that stablecoins issued by FDIC-supervised institutions be fully backed by U.S. dollars or equivalent liquid assets. Additionally, stablecoin issuers with market capitalizations over $50 billion must undergo annual audits to ensure compliance.

The FDIC’s proposed rule is part of a broader initiative to implement the GENIUS Act’s provisions. It lays out the criteria for institutions to apply for approval, sets processing timelines, and provides an appeals process for denials. The rule also includes provisions for handling applications submitted before the GENIUS Act’s official effective date, offering temporary safe harbor from certain statutory requirements for up to one year.

Public Feedback and Future Steps

The FDIC is now soliciting public comments on the proposed rule’s information-collection requirements. Acting FDIC Chair Travis Hill emphasized that the agency will continue refining the rule to align with evolving market needs. In the coming months, the FDIC plans to introduce additional regulations focusing on capital, liquidity, and risk management requirements for approved stablecoin issuers.

As stablecoin regulation continues to evolve, the FDIC is positioning itself as the primary federal regulator for eligible subsidiary stablecoin issuers. This move ensures that only qualified institutions can engage in stablecoin issuance, safeguarding financial stability while promoting innovation within the digital asset space. The FDIC’s proactive approach underscores its commitment to a well-regulated and transparent stablecoin market.

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