Travis Hill, chairman of the US Federal Deposit Insurance Corporation (FDIC), confirmed that he believes the law passed in July does not give the agency the authority to guarantee stablecoin deposits.
In prepared remarks at the American Bankers Association (ABA) meeting in Washington on Wednesday, Hill said that under the rules of the stablecoin payments law, the GENIUS Act, the FDIC will not allow the government to guarantee deposits after the law is fully implemented. Similarly, stablecoin issuers would be prohibited from suggesting that digital assets are FDIC insured, and the proposed plan would end third-party “pass-through insurance.”
“If a stablecoin payment arrangement qualifies for pass-through insurance, it means that if the bank holding the issuer’s reserves in the deposit account fails, the FDIC will insure the deposit account based on the interests of the stablecoin holders, rather than insuring the account as a corporate deposit account that only qualifies for $250 of insurance,” Hill said.
The GENIUS Act, passed by Congress and signed by US President Donald Trump in July, established a US regulatory framework for stablecoin payments. The law will be fully implemented 18 months after it is signed, or 120 days after related regulations are completed by agencies such as the FDIC and the Treasury Department.
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Although the FDIC may not insure the deposits of stablecoin holders, the issuers are expected to fully support the dollar coins.
The stablecoin yield debate continues in the market structure bill
Hill’s statement did not include a discussion of the digital asset market structure bill being discussed in the US Senate, where lawmakers and representatives of the crypto and banking industries are debating how to manage stablecoin yields, tokenized stocks and ethics.
The ABA said at the end of January that one of its priorities this year is to “stop stablecoins from being used as a substitute for deposits, which reduces the lending of public banks by prohibiting the payment of interest, income or rewards regardless of the platform.”
The White House has held three meetings with industry leaders so far this year to discuss how to move forward with the bill, but it was unclear as of Wednesday whether it would move forward.
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