FDIC Moves to Block Stablecoins Deposit Insurance Under GENIUS Act

Highlights:

• FDIC is planning rules to block stablecoin deposit insurance under the GENIUS Act.
• Stablecoin holders will not receive the $250,000 protection given to bank deposits.
• Regulators are seeking public comments as banks warn stablecoins could pull money from deposits.

The Federal Deposit Insurance Corporation is seeking to ban insurance coverage for payment stablecoins under the GENIUS Act. FDIC Chair Travis Hill explained the position during remarks at the American Bankers Association Washington Summit. He said the law does not allow stablecoins to receive federal deposit insurance. Hill added that regulators want to prevent any structure that could make stablecoins appear similar to insured bank deposits.

Travis Hill SAYS STABLECOINS WON’T QUALIFY FOR DEPOSIT INSURANCE

FDIC Chair Travis Hill said stablecoins issued under the GENIUS Act will not qualify for pass through deposit insurance, highlighting regulatory limits on government backing for digital dollar products. pic.twitter.com/sVP5gyAu6r

— Crypto Town Hall (@Crypto_TownHall) March 12, 2026

Hill noted that the GENIUS Act already prohibits deposit insurance for payment stablecoins. The law also restricts how issuers describe their digital tokens. Issuers cannot claim their stablecoins carry the full faith and credit of the United States. They also cannot say that the government guarantees these assets or protects their value.

The law further prevents issuers from presenting stablecoins as products covered by federal deposit insurance. Hill said these restrictions protect the credibility of the deposit insurance system. Bank deposits receive protection through the FDIC insurance program. That program guarantees up to $250,000 for qualifying deposits held at insured institutions.

Stablecoins operate under a different structure and remain outside this protection framework. The GENIUS Act still requires issuers to fully back dollar-pegged stablecoins with reserves. These reserves support the value of the tokens but do not create deposit insurance protection. Hill said regulators want a clear separation between insured bank deposits and digital tokens.

Stablecoins Deposit Insurance Debate Centers on Pass-Through Coverage

Pass-through insurance stands at the center of the current regulatory debate. The structure enables deposits made by a third party at a bank to be insured as though they were made by a customer. This model is widely used by broker-dealers, fintech firms, prepaid card networks, and deposit placement services. These agents store money in financial institutions on behalf of individual clients.

Assuming that the stablecoin arrangements were insurable under pass-through insurance, the arrangement would have worked differently. A bank may maintain the reserves of a stablecoin issuer in a deposit account. In the event that the bank collapsed, the FDIC would be able to insure deposits according to the interests of the holders of stablecoins.

Hill said such an outcome would conflict with the GENIUS Act’s restrictions. He argued that treating token holders as insured depositors would contradict the law’s clear language.

He added:

“Treating stablecoin holders as insured depositors, even on a pass-through basis, seems inconsistent with the GENIUS Act’s prohibition on payment stablecoins being subject to federal deposit insurance. We should answer this question definitively by regulation rather than waiting until a bank that holds stablecoin reserves fails.”

Hill also said current pass-through rules require institutions to identify depositors during normal operations. Banks must determine the identities and interests of end customers in the regular course of business. Large stablecoin systems rarely maintain this level of transparency today.

Regulators Seek Public Feedback as Stablecoin Policy Debate Expands

The FDIC plans to request public comment on the proposal. Regulators want feedback on whether pass-through insurance should apply to payment stablecoins. Hill said the agency welcomes different views before finalizing the rule.

Banks have also raised concerns about stablecoins drawing funds away from traditional deposits. The American Bankers Association addressed this issue earlier in the year. The group asked lawmakers to prevent payment stablecoins from acting as substitutes for bank deposits.

🏦AMERICAN BANKS DETERMINED TO STOP STABLECOIN YIELDS

US bank lobby reveals blocking stablecoin yields is a top 2026 priority.

The ABA argues that stablecoin payments could become deposit substitutes and wants to ban interest, yield, or rewards across all platforms. pic.twitter.com/1UvBUBKKQe

— Coin Bureau (@coinbureau) January 23, 2026

Other regulators have also begun implementing the GENIUS Act. The Office of the Comptroller of the Currency has proposed rules that restrict stablecoin yield programs. Federal Reserve officials are working with other agencies on capital and liquidity standards for stablecoin issuers.