Are Banks Ready for Stablecoin Issuance Rules in the Proposed GENIUS Act Framework?

This article was first published in The Bit Journal: Will the proposed GENIUS Act Framework, published by the FDIC, enable banks to finally take on crypto-native stablecoin issuers? Read on to discover.

The U.S FDIC has proposed a GENIUS Act framework that will allow banks to apply to issue payment stablecoins. The move is the pioneering regulatory step towards implementing the GENIUS Act, signed into law by President Donald Trump earlier this year.

According to a statement by the Federal Deposit Insurance Corporation (FDIC), the agency’s board of directors approved the proposed GENIUS Act framework that clears the way for an application process that would allow institutions to issue payment stablecoins through a subsidiary. The agency is now looking for public comments on the proposed rule.

Independent Accounting Firms to Conduct Monthly Audits

The notice stated that banks supervised by the FDIC would have to make a formal application, in which they would need to explain how their payment stablecoins would work. The regulator added that it would focus on core issues such as soundness, safety, governance, and risk controls before granting any approvals.

The FDIC has proposed a model based on the recently passed GENIUS Act, which creates a federal framework for regulating the issuance of payment stablecoins. The proposed GENIUS Act framework will require that stablecoins be fully backed by fiat currencies or equivalent liquid assets. Nonetheless, there are experts who remain skeptical and have warned of the need for caution, as they believe the GENIUS Act didn’t provide sufficient safeguards.

To boost confidence and regulatory oversight, the proposed GENIUS Act framework requires payment stablecoin issuers to appoint independent accounting firms to conduct monthly audits on their reserve balances.  The banks’ subsidiaries will also be required to clearly explain how users can redeem their tokens for US dollars promptly, including their fee schedules and advance notice of any changes to the redemption terms.

Stringent Rules That Contain Strict Guidelines

The GENIUS Act framework also proposes stringent rules and guidelines to prevent regulatory drift. The FDIC would have 30 days after the formal application to decide whether applicants have met the requirements. After that, the agency will have up to 120 days to approve or deny any applications.

The notice further states that if the agency fails to act within the period, a bank’s application would be deemed approved. Further, the notice states that denials would rest on safety and soundness grounds, adding that there would be an appeal mechanism for applicants dissatisfied with the initial decisions.

Conclusion

The proposed GENIUS Act framework highlights that federal authorities do not want to leave the issuance of payment stablecoins solely in the hands of non-bank fintech firms. Rather, the FDIC wants to provide prudential supervision over matters related to emerging digital instruments. Should the proposal be finalized as drafted, it would allow banks to compete directly with crypto firms in the issuance of dollar-backed tokens and possibly introduce bank‑like oversight through the mechanics of blockchain‑based payments.

Glossary to Key Terms

Stablecoins: Cryptocurrencies designed to keep a stable value, unlike volatile ones like Bitcoin, by pegging to a stable asset like the US dollar, gold, or other currencies, often through reserves or algorithms.

GENIUS Act: A landmark U.S. federal law passed in July 2025 that establishes a comprehensive regulatory framework for payment stablecoins.

FDIC: The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress to maintain stability and public confidence in the nation’s financial system.

Frequently Asked Questions about payment stablecoins

What are stablecoins?

Stablecoins are digital assets that aim to maintain a stable value, often pegged 1:1 to a fiat currency like the US dollar.

How do they work?

They operate on a blockchain and are typically backed by cash and cash equivalents held by the issuer. When a stablecoin is issued, a corresponding amount of the reserve asset is held in custody, and holders can redeem their tokens for the underlying asset at any time.

What are the primary use cases for payment stablecoins?

Cross-border payments: Stablecoins outperform traditional methods in terms of speed and cost, settling in minutes rather than days.

What are the main risks involved in using stablecoins?

Risks include regulatory uncertainty across jurisdictions, potential instability in value if the peg breaks, and operational challenges such as secure custody of digital wallets.

Reference

FDIC

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