The Federal Deposit Insurance Corporation on April 7, 2026 approved a notice of proposed rulemaking that translates the GENIUS Act — signed into law on July 18, 2025 — into binding operational standards for bank-affiliated stablecoin issuers. The proposal mandates 1:1 reserve backing in narrow el...
"Tokenization offers much more than just a shiny version of Zelle or Venmo." — Travis Hill, Chairman, Federal Deposit Insurance Corporation
The Federal Deposit Insurance Corporation on April 7, 2026 approved a notice of proposed rulemaking that translates the GENIUS Act — signed into law on July 18, 2025 — into binding operational standards for bank-affiliated stablecoin issuers. The proposal mandates 1:1 reserve backing in narrow eligible assets, two-business-day redemption windows, a $5 million minimum capital floor for new entrants, and a separate 12-month operating-expense liquidity buffer. Deposits held as stablecoin reserves receive no pass-through FDIC insurance to token holders.
The FDIC rule aligns with the Office of the Comptroller of the Currency's February 25 proposed framework, creating a dual-track federal regime ahead of a statutory July 18, 2026 deadline for finalized regulations. Together, these rules establish the prudential architecture for what is now a $323 billion stablecoin market — one that processed an estimated $5.7 trillion in payment-specific volume in 2025, according to McKinsey. Eleven companies have filed for or received OCC national trust bank charters in 83 days, from Circle to Morgan Stanley, signaling that the race to issue federally supervised stablecoins is no longer theoretical.
The proposal solicits feedback on 144 specific questions and opens a 60-day public comment period. What emerges from that process will determine whether banks or crypto-native firms dominate the next phase of tokenized dollar issuance.
The FDIC Board voted on April 7 to approve a proposed rule implementing multiple provisions of the GENIUS Act for FDIC-supervised permitted payment stablecoin issuers (PPSIs). These are entities organized as subsidiaries of FDIC-supervised insured depository institutions (IDIs) that seek to issue dollar-pegged payment stablecoins.
The proposal covers six core domains:
Chairman Travis Hill framed the rule as part of a broader shift in the federal government's posture toward tokenized finance. He noted that "stablecoin and tokenized deposit products continue advancing with expanding use cases" and that the proposal seeks input on whether future rulemaking should formalize capital ratios beyond the initial floor.
The proposal includes 144 specific questions for public comment — an unusually high number that reflects deliberate ambiguity on politically sensitive issues including yield prohibitions, pass-through insurance treatment, and capital calibration.
The rule defines eligible reserve assets with precision. PPSIs must maintain reserves equal to 100% of outstanding stablecoin issuance in:
This list is deliberately narrow. Corporate bonds, money market fund shares, and foreign sovereign debt are excluded. The intent, per the proposal, is to minimize credit, duration, and liquidity risk in the reserve pool.
Marcel Thiess, CEO of Thiess Invest, noted in commentary published by PYMNTS that this narrowness creates concentration risk: "You push every large issuer into the same short-dated Treasuries and insured deposits, and you have built a stablecoin reserve system that is essentially an overlay on top of the same money market positions."
Reserves must be segregated from the PPSI's operating funds and from the parent bank's balance sheet. Real-time segregation, continuous monitoring, and intraday reconciliation are required — operational demands that will require material infrastructure investment, particularly for smaller institutions entering the market.
Capital. New PPSIs face a $5 million minimum capital requirement for their first three years, or a higher amount at the regulator's discretion. The FDIC explicitly declined to prescribe a specific capital ratio or objective framework at this stage, instead soliciting comment on whether a formal ratio should be adopted in subsequent rulemaking. This "principles-based" approach leaves substantial discretion with examiners.
Liquidity buffer. Separate from the 1:1 reserve pool, PPSIs must maintain highly liquid assets equal to 12 months of total operating expenses. This operational backstop is designed to ensure an issuer can continue functioning — and process redemptions — even during periods of market stress when reserve assets may face temporary illiquidity.
Redemption. PPSIs must honor redemption requests within two business days at par value. For large redemptions exceeding 10% of total outstanding issuance in any 24-hour period, the issuer must notify the FDIC and may request a discretionary extension. The two-day standard mirrors traditional banking settlement norms but represents a significant constraint compared to the near-instant redemptions that Circle and Tether currently offer on their platforms.
Thiess flagged a structural tension: "Most intraday shortfalls come from the banking side — settlement lags, cut-off times, and the bank's own liquidity management. The issuer is not involved here." The rule places accountability on the PPSI even when the parent bank controls settlement and custody infrastructure.
The proposal explicitly provides that deposits held as stablecoin reserves at insured banks are insured only as corporate deposits of the PPSI entity — subject to the standard $250,000 FDIC coverage limit. There is no pass-through insurance to individual stablecoin holders.
This reflects the GENIUS Act's statutory prohibition on deposit insurance for payment stablecoins. The practical implication: a holder of $10,000 in bank-issued stablecoins has a claim on the PPSI's reserve pool, not on the FDIC's Deposit Insurance Fund. In a wind-down scenario, stablecoin holders are creditors of the issuer, not depositors of the bank.
This distinction separates payment stablecoins from tokenized deposits — which the FDIC reaffirmed remain insured under the Federal Deposit Insurance Act when structured as deposits in tokenized form. The regulatory line between "stablecoin" and "tokenized deposit" now carries material economic consequences for holders.
The OCC published its own 400-page proposed rule on February 25, 2026, covering nationally chartered banks and federal trust companies. The FDIC's April 7 proposal was designed to align closely with the OCC framework, creating coordinated — though not identical — requirements across the two primary federal banking regulators.
Key alignment points:
| Requirement | OCC (Feb 25) | FDIC (Apr 7) | |---|---|---| | Reserve standard | 1:1 in eligible assets | 1:1 in eligible assets | | Redemption window | 2 business days | 2 business days | | Minimum capital | $5M floor (3 years) | $5M floor (3 years) | | Liquidity buffer | 12 months opex | 12 months opex | | Pass-through insurance | N/A (OCC banks) | Explicitly denied | | Yield prohibition | Implemented via rebuttable presumption | Under review | | Comment deadline | May 1, 2026 | ~60 days post-Federal Register |
The Federal Reserve Board and National Credit Union Administration (NCUA) are expected to issue their own parallel proposals. The NCUA has already submitted its GENIUS Act rulemaking to the Office of Management and Budget. All four regulators face the same July 18, 2026 statutory deadline for final rules.
The OCC's proposal additionally asserts exclusive visitorial authority over federally chartered PPSIs — a jurisdictional claim that, if upheld, would preempt state regulators from conducting examinations of these entities. This has implications for existing state-chartered stablecoin issuers that may seek or be forced into federal charters.
The regulatory framework is materializing into a market that has grown substantially. Total stablecoin market capitalization reached approximately $323 billion as of early April 2026, according to Phemex data. Tether's USDT commands approximately $196 billion; Circle's USDC holds roughly $77 billion; and Sky's USDS sits at approximately $13 billion.
The competitive dynamics have shifted. In January 2026, Tether launched USAT (USA₮), a federally regulated stablecoin issued through Anchorage Digital Bank under OCC supervision. Led by Bo Hines, former Executive Director of the White House Crypto Council, USAT is designed for GENIUS Act compliance and targets institutional demand. Cantor Fitzgerald serves as reserve custodian.
Circle is pursuing its own national trust bank charter from the OCC. According to CoinDesk, Circle's USDC outpaced USDT in monthly growth throughout 2025 and into 2026, driven by institutional preference for compliance-first issuance.
The charter race extends well beyond stablecoin-native firms. Between December 2025 and March 2026, eleven companies filed for or received OCC national trust bank charters in 83 days, according to FinTech Weekly. The list includes Circle, Ripple, BitGo, Paxos, Fidelity Digital Assets, Bridge (Stripe's subsidiary), Crypto.com, Protego, Morgan Stanley, Payoneer, and Zerohash. Morgan Stanley's filing on February 18, proposing "Morgan Stanley Digital Trust National Association," signals that the largest Wall Street firms view stablecoin infrastructure as a core business line.
PYMNTS Intelligence data illustrates the adoption gap that these rules aim to close: over 40% of mid-market firms have tested stablecoins, but only 13% report actual usage. Companies appear to be waiting for regulatory clarity and banking integration before committing to production-scale deployment.
Concentration risk. The narrow reserve definition channels all large issuers into identical asset pools — short-dated Treasuries and insured deposits. A systemic redemption event could create correlated selling pressure across the same instruments that back the entire stablecoin market.
Yield prohibition enforcement. The GENIUS Act bans issuers from paying interest or yield directly to holders. The OCC implements this through a "rebuttable presumption" targeting affiliate and related-party arrangements. The FDIC is still soliciting comment. Third-party DeFi lending and exchange earn products fall outside the ban, creating an arbitrage channel that may undermine the prohibition's intent.
Operational burden on smaller banks. Real-time reserve segregation, intraday reconciliation, smart contract monitoring, and annual AML/CFT certification requirements impose compliance costs that favor large institutions with existing infrastructure. Community banks and credit unions — theoretically eligible under the GENIUS Act — may find the operational bar too high.
Two-day redemption vs. market expectations. Crypto-native issuers currently process redemptions in minutes. A two-business-day standard, while aligned with banking norms, creates a potential competitive disadvantage for bank-issued stablecoins relative to established non-bank issuers that maintain faster processing.
Capital calibration uncertainty. The FDIC's decision to defer prescriptive capital ratios to future rulemaking leaves a gap. Examiners will exercise case-by-case discretion, which introduces regulatory uncertainty for applicants and potential inconsistency across institutions.
The FDIC's proposed rule marks the transition from stablecoin legislation to stablecoin regulation. Nine months after the GENIUS Act's signing, federal banking agencies are building the supervisory infrastructure to govern a $323 billion market. The framework prioritizes reserve integrity and issuer accountability over consumer-facing insurance guarantees — a choice that places stablecoins closer to money market instruments than bank deposits in the regulatory taxonomy.
The 60-day comment period will surface the tensions between prudential caution and market competitiveness. Narrow reserve definitions reduce risk but create concentration. Two-day redemption windows align with banking norms but lag crypto-native processing speeds. The $5 million capital floor invites participation but deferred ratio requirements introduce uncertainty.
With eleven charter applications filed in 83 days and a July 18 regulatory deadline approaching, the market is not waiting for perfect answers. The question is no longer whether banks will issue stablecoins. It is under what terms — and whether the terms are workable at scale.