The FDIC board voted 3-0 on April 7 to approve a proposed rule that would let FDIC-supervised banks issue payment stablecoins through subsidiaries, subject to reserve, capital, and redemption requirements under the GENIUS Act. The rule also draws a line that stablecoin issuers will not be able to blur: deposits held as stablecoin reserves do not carry pass-through FDIC insurance to the people holding those stablecoins.
Banks Get a Playbook, With Guardrails
The proposal establishes the operational framework for banks that want to issue "payment stablecoins" as defined by the GENIUS Act. Chairman Travis Hill, along with Directors Gould and Vought, voted unanimously in favor.
The core requirements:
- 1:1 reserves in eligible assets backing every token issued
- Redemption within two business days of a holder's request
- Tailored capital requirements for both the stablecoin-issuing subsidiary and its parent bank
- A $5 million minimum capital floor for new permitted payment stablecoin issuers during their first three years
- Prohibited and permissible activities clearly defined for issuing subsidiaries
Banks must apply to the FDIC for subsidiary approval before issuing. Applications will be evaluated against statutory factors, with an appeal process for denials. This is the FDIC's second GENIUS Act proposal. The first, from December 2025, addressed application procedures. This one covers what happens after approval.
The Deposit Insurance Wall
The sharpest provision: stablecoin holders are not covered by FDIC insurance.
Deposits held in reserve accounts backing stablecoins are still deposits under the Federal Deposit Insurance Act. The bank holding those reserves gets the same protections as any other deposit relationship. But that insurance does not flow through to the person holding the stablecoin. If the issuing bank fails, stablecoin holders are creditors, not insured depositors.
This matters because the GENIUS Act itself prohibits marketing payment stablecoins as federally insured products. The FDIC's rule operationalizes that prohibition. No bank can slap "FDIC-insured" on a stablecoin the way it does on a checking account.
Tokenized deposits, by contrast, get full insurance treatment. The FDIC said deposits recorded in tokenized form still qualify as deposits if they meet the statutory definition. The technology used for recordkeeping does not change the insurance analysis. A tokenized deposit on a blockchain is still a deposit. A stablecoin is not.
That distinction will shape how banks position their products. A bank-issued stablecoin competes with Tether and Circle on the open market. A tokenized deposit stays inside the banking system's insurance wrapper. Both use blockchain rails. Only one carries a federal backstop.
No Yield, No Interest
The proposal also restricts yield. Issuers cannot pay interest or yield to holders "simply for holding or using a payment stablecoin," including through third-party arrangements. Properly structured rewards programs may be permissible, but the rule is designed to prevent stablecoins from functioning as interest-bearing deposit substitutes.
This restriction tracks with how the GENIUS Act defines payment stablecoins: instruments used for payments and settlement, not savings vehicles. The line between "reward" and "yield" will be tested during the comment period. The FDIC posed 144 specific questions to the public, several of which probe exactly where that boundary sits.
For crypto card users, this has a downstream effect. Cards that let you spend stablecoins at the point of sale are spending a payment instrument, not drawing down an interest-bearing account. The FDIC's framework reinforces that framing.
How This Fits the Regulatory Stack
The FDIC is not working alone. The OCC released an aligned proposal in February covering national banks and federal savings associations. The Treasury published its own stablecoin NPRM on April 2, setting a $10 billion threshold for separating state and federal oversight. Together, these three agencies are building the full regulatory architecture the GENIUS Act requires.
Each covers a different slice:
- Treasury: the macro framework, state vs. federal jurisdiction, the $10 billion line
- OCC: rules for nationally chartered banks
- FDIC: rules for state-chartered, FDIC-insured banks
The 60-day comment period for the FDIC's proposal starts once the rule is published in the Federal Register. Given the OCC's February proposal and the Treasury's April filing, the industry is now responding to three overlapping comment periods on the same underlying law.
What This Means for Tether and Circle
Neither Tether nor Circle operates through a bank subsidiary, so neither is directly subject to this rule. But the framework creates a new class of competitor. JPMorgan, U.S. Bank, or any FDIC-supervised institution that applies and gets approved can issue its own payment stablecoin, backed by the same reserve and redemption standards the market already expects from USDT and USDC.
The catch: bank-issued stablecoins cannot promise yield or insurance. They compete purely on trust, distribution, and integration with existing payment rails. Whether that is enough to challenge $150+ billion in circulating USDT remains an open question. But the path is now formally open.
BTC was trading at $71,955 (+4.4% over 24 hours) and ETH at $2,243 (+6.0%) as of April 8, 2026. The Fear and Greed index sat at 47, neutral. Markets did not react to the FDIC vote specifically. The broader rally reflects ceasefire developments and macro tailwinds rather than regulatory catalysts.
Overview
The FDIC voted unanimously on April 7 to propose rules governing how FDIC-supervised banks can issue payment stablecoins through subsidiaries under the GENIUS Act. The framework requires 1:1 reserves, two-day redemption, tailored capital standards, and a $5 million minimum for new issuers. Stablecoin holders will not receive FDIC insurance, and issuers cannot pay yield. This is the third major federal agency to propose GENIUS Act rules, following the OCC in February and the Treasury on April 2. A 60-day comment period opens upon Federal Register publication.
