US Banks Prepare for Stablecoin Issuance Under FDIC GENIUS Act

The Federal Deposit Insurance Corporation is moving forward with rule-making under the US GENIUS Act, proposing a framework for how regulated banks could apply to issue payment stablecoins. A 38-page document posted to the FDIC's website details proposed approval requirements for the issuance of payment stablecoins by subsidiaries of FDIC-supervised institutions.

According to the proposal, banks would apply through a subsidiary, with the FDIC assessing both the subsidiary and its parent institution against criteria set out in the GENIUS Act, including the ability to meet stablecoin issuance standards, financial condition, management quality, and redemption policies.

Once approved, the FDIC would serve as the primary federal regulator overseeing the subsidiary's payment stablecoin activities. The GENIUS Act, signed into law by US President Donald Trump on July 18, 2023, establishes a comprehensive regulatory framework for payment stablecoins, requiring issuers to maintain one-to-one reserve backing with US dollars or other approved high-quality liquid assets.

This legislation has been welcomed by the cryptocurrency industry, with senior executives from major companies such as Coinbase, Circle, Robinhood, and Gemini attending the signing. Some industry participants view the GENIUS Act as a tool to enhance US dollar liquidity and extend its global reach through stablecoins, a sentiment echoed by US Treasury Secretary Scott Bessent.

The total value of stablecoins in circulation has surpassed $300 billion globally, driven mainly by US dollar-pegged tokens. This development signifies a potential shift in the banking landscape, impacting digital currency adoption and regulatory frameworks within the sector.