FDIC Approves Stablecoin Rules as Banks Target the $323 Billion Market
FDIC approves stablecoin issuer standards under the GENIUS Act, opening the door for major U.S. banks to compete with Tether and Circle.
Quick Insights
- The FDIC approved proposed prudential standards for stablecoin issuers on April 7, advancing the second phase of rulemaking under the GENIUS Act signed by President Trump in July 2025.
- The rules require 1:1 reserves in dollars or short-term Treasuries, redemption within two business days, minimum capital of $5 million for new issuers, and a 12-month liquidity buffer.
- JPMorgan is already operating deposit tokens on a public blockchain. Bank of America, Citigroup, and Wells Fargo explored a joint stablecoin project as early as May 2025.
The FDIC approved proposed prudential standards for stablecoin issuers on Monday. The vote advances the second phase of rulemaking under the GENIUS Act, the first federal stablecoin law in U.S. history. It arrives as the country's largest banks are positioning to compete in a market that has grown past $323 billion.
The proposed rules cover reserve requirements, redemption timelines, capital standards, and custody obligations. A 60-day public comment period begins once the rules hit the Federal Register. The GENIUS Act sets a deadline of July 18, 2026, and the pace of rulemaking suggests regulators intend to meet it.
How the GENIUS Act Splits the Market
The GENIUS Act, signed on July 18, 2025, created a two-tier system. Issuers with less than $10 billion in stablecoins answer to state regulators. Those above $10 billion fall under the OCC. Every issuer must hold 1:1 reserves in dollars or short-term Treasuries, submit to audits, and get licensed.
The law carved stablecoins out of SEC and CFTC jurisdiction entirely. They are neither securities nor commodities under this framework. That clarity removed one of the biggest barriers keeping banks out. Banks, credit unions, and licensed non-bank firms can all issue stablecoins under the new rules.
- 1:1 reserves required in U.S. currency, Federal Reserve balances, insured deposits, short-term Treasuries, or qualifying repo agreements
- Reserves must be monitored daily and held separately from other business activities
- Redemption within two business days, with regulators notified if withdrawals exceed 10% of outstanding issuance in 24 hours
- New issuers must hold minimum $5 million in capital for their first three years
- Ongoing capital must be held in high-quality forms like core equity, not debt or lower-grade instruments
- Separate liquidity buffer equal to 12 months of operating expenses
- Stablecoins will not receive FDIC deposit insurance on a pass-through basis
Bank of America's CEO Warned That $6 Trillion in Deposits Could Move to Stablecoins
The banking industry's interest in stablecoins is driven by a combination of opportunity and fear. Bank of America CEO Brian Moynihan made his position clear shortly after the GENIUS Act passed, telling analysts the bank would enter the stablecoin business if permitted. By January 2026, during the bank's Q4 2025 earnings call, Moynihan's tone had shifted from enthusiasm to warning.
"If you take out deposits, they're either not going to be able to loan or they're going to have to get wholesale funding, and that wholesale funding will come at a cost."
Moynihan cited a Treasury study estimating that up to $6 trillion in deposits could migrate to stablecoins if regulators permit yield payments. That is roughly 30-35% of all U.S. commercial bank deposits. The concern is simple: stablecoin reserves sit in Treasuries rather than being lent out. If deposits move off bank balance sheets, the money available for loans shrinks and borrowing costs go up.
That $6 trillion figure assumed regulators would eventually allow stablecoin yield. Under the current rules, they have not. The GENIUS Act bans stablecoin issuers from paying interest or yield to holders, and both the OCC and FDIC have interpreted that restriction strictly, prohibiting even third-party yield arrangements.
JPMorgan Already Has Deposit Tokens on a Public Blockchain
JPMorgan is the furthest ahead among the major banks. Its blockchain division, Kinexys, has been running deposit tokens since June 2025. In November 2025, JPM Coin went live for institutional clients on Coinbase's Base network after trials with Mastercard, Coinbase, and B2C2. By January 2026, it had expanded to the Canton Network.
JPM Coin is a deposit token, not a payment stablecoin under the GENIUS Act. It represents a claim on bank deposits rather than a separate reserve-backed product. But the technology is similar. JPMorgan already has the infrastructure and client base to issue a compliant stablecoin if it decides to.
Bank of America, Citigroup, and Wells Fargo explored a joint stablecoin project as early as May 2025, according to the Wall Street Journal. Wells Fargo has separately piloted a digital cash token for internal settlement. The direction across the industry is consistent: the largest U.S. banks are building the plumbing for stablecoin issuance regardless of whether they have launched products to the public yet.
Tether and Circle Are Already Above the Federal Threshold
The existing stablecoin leaders are far larger than anything the banks have built. Tether holds about $184 billion in circulation. Circle's USDC sits at roughly $77 billion. Together they anchor a market that crossed $33 trillion in annual volume earlier this year, per DefiLlama data.
Both Tether and Circle exceed the $10 billion federal threshold under the GENIUS Act, which means they face the same OCC oversight as any bank-issued competitor. Tether has responded by engaging a Big Four accounting firm to enhance transparency as it seeks expanded U.S. operations. Circle already operates under state money transmitter licenses and has positioned USDC as a regulated alternative from the start.
The competition breaks down simply. Banks bring trust, existing customers, and regulatory access. Tether and Circle bring scale and years of operating history. The GENIUS Act puts them under the same rules for the first time. The next 12 months will show whether that levels the field or just raises costs for everyone.
The Yield Ban Creates an Odd Competitive Gap
The most contentious aspect of the GENIUS Act is the strict ban on paying interest or yield to stablecoin holders. Bank savings accounts pay interest. Bank-issued stablecoins cannot. That restriction creates a product that is in some ways less attractive than a standard deposit account, even though it settles faster and operates around the clock.
Moynihan's $6 trillion warning assumed regulators would eventually permit yield. The current rules do not. Research firm 21Shares forecasts the stablecoin market will exceed $1 trillion by the end of 2026 even without yield, driven partly by bank entry and institutional adoption. Galaxy Digital predicts stablecoins will overtake ACH transaction volume this year.
Whether the yield ban holds depends on the comment period and the political climate. The FDIC is accepting feedback on 144 questions in the proposal, including the yield issue. If the ban stays, banks compete on speed and trust. If it is loosened, the deposit migration Moynihan warned about becomes a real possibility.
What Happens Next
The FDIC's proposed rules enter a 60-day comment period starting today. Full implementation, combined with the companion CLARITY Act for broader crypto assets, could take until early 2027. The statutory deadline under the GENIUS Act is July 2026, which means the regulatory framework should be substantially finalised within the next three months.
For the broader crypto market, the signal matters as much as the timeline. Regulated bank stablecoins would bring institutional credibility to digital dollar infrastructure. As we covered in our analysis of Japan's stablecoin programme, the countries with clear frameworks are already seeing real deployment. The U.S. is now building its own, and the banks are preparing to move.
