On April 7, the Federal Deposit Insurance Corporation (FDIC) Board approved its second notice of proposed rulemaking (NPRM) implementing the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act). This second set of FDIC proposed regulations would establish prudential standards for FDIC-supervised permitted payment stablecoin issuers (PPSIs) and FDIC-supervised stablecoin custodians, and it would update the capital and deposit insurance frameworks for the bank parents of those issuers and for stablecoin reserves and tokenized deposits.

Key Takeaways

  • PPSIs must redeem stablecoins within two business days.
  • Reserves must be held 1:1 in a tightly defined list of eligible assets, with no more than 40% at any single counterparty.
  • Capital is individualized rather than a fixed ratio, with a $5 million floor and a 12-months-of-expenses operational backstop.
  • Reserve deposits at an insured depository institution are insured to the PPSI as corporate deposits, not to stablecoin holders on a pass-through basis.
  • Tokenized deposits are deposits for federal deposit insurance purposes, insured like any other deposit.

Permitted and Prohibited Activities

A PPSI’s permitted activities are limited to four core functions: issuing stablecoins, redeeming them, managing reserves, and providing custody for stablecoins, reserves, and related private keys, along with directly supporting activities and FDIC-authorized digital asset service provider activities.

The prohibited list is consequential. A PPSI may not pay interest or yield to holders solely for holding the stablecoin, extend credit to customers to purchase its stablecoins, or pledge, rehypothecate, or reuse reserves, subject to narrow exceptions for margin, custodial, and overnight Treasury repurchase transactions. The proposal also bars using “United States” or similar government designations in a stablecoin’s name and representing the coin as legal tender, government-guaranteed, or federally insured.

Reserves

A PPSI must hold identifiable reserves equal to or greater than its outstanding issuance value, monitored intra-day. Eligible reserve assets are limited to: (1) U.S. coins and currency; (2) Federal Reserve Bank balances; (3) demand deposits at insured depository institutions and credit union shares; (4) U.S. Treasuries with 93 days or less to maturity; (5) certain overnight repurchase and reverse-repurchase transactions backed by short-dated Treasuries; and (6) shares of registered government money market funds invested only in those underlying assets. Reserves are valued at GAAP fair value (cash at face value) and segregated by stablecoin brand for any PPSI that issues more than one coin.

No single eligible counterparty may hold more than 40% of reserves. The PPSI must be able to monetize reserves quickly and must maintain a written restoration plan for stress events.

Two-Business-Day Redemption

A PPSI must redeem outstanding stablecoins on a “timely” basis: no later than two business days after a request. The PPSI must publish its redemption policy, disclose all fees, and give at least seven calendar days’ notice before raising fees.

Aggregate requests exceeding 10% of outstanding issuance value within 24 hours constitute a “significant redemption request” requiring immediate FDIC notice; the FDIC may extend the redemption window.

Capital and Operational Backstop

Each PPSI receives an individualized minimum capital requirement during its three-year de novo period, with a $5 million floor. Capital can consist only of common equity tier 1 (CET1) and additional tier 1. Tier 2 is not permitted.

The proposal also requires an operational backstop: a separate pool of highly liquid assets, distinct from reserves and capital, equal to the PPSI’s total expenses over the prior 12 months.

When an FDIC-supervised bank owns a PPSI, the bank must deconsolidate the PPSI from its regulatory balance sheet, deduct the PPSI’s positive retained earnings from the bank’s CET1, and exclude its investment in or receivable from the PPSI from risk-weighted assets, average total consolidated assets, and total leverage exposure. The effect insulates the bank’s regulatory capital from the PPSI, as the GENIUS Act requires.

Risk Management, Anti-Money Laundering (AML), and Information Security

The proposal imports operational and managerial standards covering internal controls, audit, interest-rate risk, asset growth, affiliate transactions, third-party oversight, and liquidity. The proposal also addresses information-security risks specific to stablecoins: smart-contract code controls, private-key management (multi-party computation, multi-signature arrangements, cold storage, and geographically dispersed encrypted recovery keys), incident response, and resilience.

PPSIs must certify their AML and sanctions program within 180 days of approval and annually by April 1 thereafter.

Custody and Safekeeping

The proposal also covers FDIC-supervised custodians providing custody for stablecoin reserves, stablecoins held as collateral, or related private keys. The custodian must segregate customer property from its own assets. For tokenized assets, it must maintain “control”: no other party can transfer the asset without the custodian’s affirmative consent. Commingling is prohibited, with three GENIUS-aligned exceptions: bank omnibus accounts, cash held as a deposit liability, and routine operational withdrawals.

Reporting, Audit, and Public Disclosure

PPSIs face a layered reporting regime: confidential weekly reports, quarterly Call Report-style financial-condition reports within 30 days of quarter-end, and notice filings on triggers like reserve shortfalls and significant redemption requests.

Monthly reserve-composition reports must be examined by a registered public accounting firm and certified by the CEO and CFO. PPSIs with more than $50 billion in consolidated outstanding issuance value must also obtain audited annual financial statements.

Deposit Insurance Treatment

The proposal updates the FDIC’s deposit insurance rules in two ways. First, deposits an insured depository institution holds as reserves backing a payment stablecoin are deposits of the PPSI, insured as corporate deposits up to the standard maximum deposit insurance amount. They are not insured to individual stablecoin holders on a pass-through basis.

Second, the proposal codifies that federal deposit insurance is technology neutral: a tokenized deposit meeting the statutory definition of “deposit” is insured like any other deposit under the Federal Deposit Insurance Act.

What’s Next

The Office of the Comptroller of the Currency (OCC) published its parallel GENIUS Act proposed rule on March 2, 2026. The OCC’s NPRM reaches a wider range of issuers (national banks, federal savings associations, federal and foreign branches, and the federal qualified PPSI pathway open to nonbanks), while the FDIC rule covers only subsidiary PPSIs of state non-member banks and state savings associations. The FDIC has indicated it sought to align with the OCC’s proposed rule where relevant. The FDIC also seeks comments on the extent to which the primary federal payment stablecoin regulators should further align in their final rules to promote consistency of regulations applicable to all PPSIs subject to the GENIUS Act.

The comment period for the FDIC’s proposed rule closes on June 9. Open questions include capital and liquidity calibration, the eligible reserve asset list, the two-business-day standard, affiliate-transaction limits, customer-priority waivers in resolution, and change-in-control review for PPSI acquisitions.

This is the second FDIC rulemaking designed to implement the GENIUS Act. On December 19, 2025, the FDIC issued its first proposed rulemaking that would establish application procedures for insured depository institutions seeking approval to issue payment stablecoins through a subsidiary. The comment period closed on May 18, 2026.