.svg)
The new framework signals a high-barrier, high-discretion regime that could narrow the market to a handful of systemic players that can respond to shifting regulatory demands, leaving smaller banks on the sidelines.
The Federal Deposit Insurance Corporation鈥檚 (FDIC) second to implement the GENIUS Act, issued in April 2026, establishes a framework under which insured depository institutions (IDIs) may issue payment stablecoins through subsidiaries.
The 46-page proposal, now subject to a 60-day comment period, contains provisions on baseline prudential requirements covering capital, reserves, redemptions and operational resilience. It builds on a , published in December 2025, establishing the application and approval regime for permitted payment stablecoin issuers (PPSIs).
The latest proposed rule incorporates approval-related mechanisms into an ongoing supervisory framework, reflecting an approach in which licensing and supervision are closely intertwined.
Together, the two proposed rules define which FDIC-supervised institutions may issue payment stablecoins and how they must operate once approved.
A subsidiary-based issuance model
Under the proposed framework, FDIC-supervised banks may not issue stablecoins directly. Instead, issuance must occur through a separately incorporated PPSI 鈥 a subsidiary that must obtain FDIC approval and will be subject to ongoing supervision.
By ring-fencing stablecoin activities from the bank鈥檚 balance sheet, the FDIC ensures PPSIs are legally distinct yet subject to bank-like oversight. This reflects a deliberate policy choice designed to permit innovation while ensuring containment of risk within defined institutional boundaries.
However, the subsidiary model will significantly increase the cost of entry for mid-sized banks. It may be that only the largest IDIs can afford to have a PPSI as a separate legal entity, leaving smaller players to rely on third-party partnerships rather than issuing stablecoins themselves.
In addition, it could create intra-company friction. Banks will need to navigate complex service level agreements (SLAs) between the parent IDI and the PPSI subsidiary, adding a layer of operational complexity that non-bank issuers such as Circle do not have to deal with.
Stage one: the licensing gateway
The December 2025 proposed rule establishes a detailed application process requiring prospective issuers to submit extensive information on product design, governance, financial condition and operational controls.
Applicants must detail mechanics, reserves and multi-year financials. The FDIC will evaluate these against statutory 鈥渟afety and soundness鈥 criteria to ensure the issuer does not jeopardise systemic stability.
This stage is explicitly time-bound, with the FDIC given 30 days to determine whether an application is 鈥渟ubstantially complete鈥 once received, and 120 days thereafter to either approve or deny it. If an application is denied, appeals must be initiated in writing within 30 days of receipt of the denial.
Although the 120-day review period provides some certainty around timelines, it is a relatively short window for the FDIC to consider applications and request additional data.
This increases the importance of pre-filing contact with the regulator 鈥 by engaging early on an informal basis, firms can ensure that all of the details they are submitting will be acceptable and avoid having to 鈥渧oluntarily鈥 withdraw their application or be denied a licence.
Stage two: prudential standards for approved issuers
The latest proposed rule builds out the ongoing requirements applicable to approved PPSIs. Unlike the licensing rule, this framework introduces substantive prudential obligations that govern day-to-day operations and long-term risk management.
Newly approved (鈥渄e novo鈥) PPSIs must maintain a minimum capital level of at least $5m for an initial supervisory period of 36 months, subject to adjustment by the FDIC.
This discretion for the regulator is, in effect, a lever to control growth 鈥 the FDIC will be able to use discretionary capital add-ons to cap a bank鈥檚 stablecoin market share if its risk management is insufficient.
Issuers must also ensure that they maintain capital commensurate with their risk profile, including off-balance sheet exposures.
Each PPSI must implement an internal capital adequacy assessment process and maintain a strategy for sustaining sufficient capital over time, subject to supervisory review and disclosure to the FDIC.
Rather than imposing fixed ratios, the framework relies on principles-based capital adequacy, subject to regulatory oversight. In addition to capital, PPSIs must hold assets equivalent to 12 months of operating expenses.
This operational backstop is intended as a resilience buffer, ensuring continuity of operations under stress and enabling an orderly wind-down if necessary.
As such, the headline $5m minimum capital level is a little misleading 鈥 the combination of discretionary add-ons and 12-month operating expense requirement mean that the true capital requirement will be much higher for high-volume issuers.
Reserve requirements and redemption mechanics
The proposal reinforces the GENIUS Act鈥檚 strict reserve model, requiring full, one-to-one backing of outstanding stablecoins with high-quality, low-risk assets.
Reserve assets must be properly segregated and safeguarded, with robust controls over custody and reconciliation.
Redemption obligations are also explicitly defined, and PPSIs are generally required to redeem stablecoins within two business days.
The T+2 mandate ensures liquidity, but traps reserves in low-yield instruments such as overnight repos, potentially affecting the business model鈥檚 profitability.
In addition, if the market moves towards instant settlement via private networks, bank-issued stablecoins will be at a disadvantage 鈥 users will prefer non-bank issuers if the FDIC-regulated alternative is too slow for their needs.
Deposit insurance boundary
Another key clarifying provision addresses the treatment of reserve deposits held at IDIs.
The proposal specifies, as previously covered by 天涯海角社区, that such deposits do not confer pass-through FDIC insurance to stablecoin holders.
This reinforces a strict legal separation between insured depositors of banks and holders of stablecoins backed by those deposits, and will force stablecoins to compete on utility and trust rather than perceived government backing.
The lack of pass-through insurance will create a challenge for bank issuers seeking to convince customers that their stablecoins are a better option than non-bank competitors such as USDC, despite neither being FDIC-insured.
A principles-based supervisory model
Taken together, the two proposed rules aim to establish a complete but relatively flexible supervisory framework for bank-issued payment stablecoins.
Rather than relying on tightly specified quantitative thresholds, the FDIC is adopting a principles-based approach in which capital adequacy, risk management and operational resilience are defined through supervisory expectations and case-by-case calibration.
This gives the agency significant discretion to tailor requirements through both the approval process and ongoing supervision.
For firms, it introduces a regime in which compliance is not only a function of meeting baseline requirements, but also of satisfying evolving supervisory judgement.
As such, the FDIC鈥檚 GENIUS Act implementation could create a structured pathway for bank-affiliated stablecoin issuance, but one that is both front-loaded and supervisory-intensive.
Entry into the system would require firms to demonstrate full operational readiness at the point of application, and ongoing obligations would impose continuous prudential discipline across capital, reserves, redemptions, liquidity and governance.
One area of concern is that the flexibility of the framework could be almost a regulatory black box, with the FDIC retaining the power to move the goalposts as events unfold.
Banks must prepare for the risk that different examiners will apply the principles of the regulations with varying degrees of rigour.
Although the GENIUS Act opened the door for banks to enter the stablecoin market, the high cost of the subsidiary model and the lack of pass-through insurance may ensure that only the largest, most systemically significant institutions can actually do so.
