How the new FDIC framework allows US banks to issue stablecoins

The disruptive stablecoin application process of the FDIC is now live.

The Federal Deposit Insurance Corporation is fundamentally changing the landscape of the U.S. banking industry by launching its comprehensive stablecoin issuance framework. This milestone marks a significant moment at the intersection of traditional finance and digital assets, establishing the first formal regulatory pathway for U.S. deposit institutions to participate in stablecoin issuance. The FDIC Stablecoin Bank Framework 2025 introduces a structured application process that eliminates the ambiguity previously surrounding regulated financial institutions' stablecoin issuance. Banks now operate within clearly defined regulatory parameters set forth under 12 C.F.R. §303.252, titled "Permissible Payment Stablecoin Issuers." This regulatory clarity enables institutions to shift from theoretical interest in blockchain technology to concrete operational planning. The framework specifically targets payment stablecoins—digital tokens backed by U.S. dollar reserves—which serve as a bridge between the traditional banking system and decentralized financial infrastructure. Deposit institutions interested in stablecoin issuance must establish dedicated subsidiaries known as Payment Stablecoin Subsidiary Issuers to handle the creation and management of the tokens. This structural requirement ensures a separation between traditional banking activities and stablecoin operations, providing regulatory oversight and risk isolation. The application process reflects years of regulatory deliberation, representing a carefully balanced approach to innovation that protects depositors while promoting technological advancement. Institutions seeking approval must demonstrate a profound understanding of blockchain infrastructure, reserve management agreements, and risk mitigation strategies that transcend traditional banking.

The conditions that banks must meet regarding capital, liquidity, and reserve requirements.

The FDIC stablecoin proposal's requirements establish strict capital and liquidity standards that differentiate the issuance of stablecoins from traditional banking activities. These requirements represent a comprehensive risk management framework designed to ensure that dollar-backed stablecoins remain fully collateralized and operate with transparent reserve support. Banks pursuing stablecoin issuance must maintain capital reserves that exceed the minimum thresholds for traditional deposit activities, reflecting the unique risk characteristics associated with blockchain payment systems. Reserve management obligations require institutions supporting stablecoins to hold dollar-denominated assets in a one-to-one ratio with outstanding tokens, ensuring that full collateralization is always maintained. Acceptable reserve assets include cash balances held at Federal Reserve Banks, short-term government securities, and other high-liquidity, low-risk financial instruments specifically approved by regulators. This reserve structure prevents the partially collateralized arrangements that characterized problematic stablecoin schemes in previous years and establishes that the FDIC's stablecoin bank framework for 2025 is significantly more conservative than decentralized alternatives. Banks must also maintain sufficient liquidity buffers to handle redemption requests without disrupting operations, meaning institutions cannot invest reserves in illiquid investments, regardless of potential returns. The framework requires quarterly reporting to demonstrate compliance with all capital and liquidity metrics, and regulators retain the authority to adjust requirements based on emerging risk factors or market conditions. Payment stablecoin subsidiary issuers operate under enhanced oversight provisions, including regular audits of reserve holdings and independent verification of token supply figures. These provisions establish an audit trail and reporting mechanism that instills confidence among institutional investors, retail users, and regulators in the integrity of dollar-backed stablecoins issued by approved banks.

The Genius Act: How Congress is Enabling U.S. Banks to Enter the Stablecoin Market

The GENIUS Act, officially named the "Ensuring Basic Non-Discrimination Standard Act," represents the legislative foundation for enabling U.S. banks to issue digital currencies through the FDIC framework. Congress enacted this legislation in recognition that the lack of a clear regulatory path has created a competitive disadvantage for U.S. financial institutions compared to foreign bank systems that have adopted stablecoin technology. The GENIUS Act's stablecoin regulation provides statutory authority to establish rules for federal banking agencies, governing the issuance of payment stablecoins by depository institutions, fundamentally shifting the regulatory approach from prohibition to structural empowerment. Prior to this legislation, banks operated in a regulatory gray area where the issuance of stablecoins was technically possible but not encouraged due to ambiguous legal status and potential regulatory actions. The Act explicitly authorizes the FDIC to develop approval processes and regulatory mechanisms for stablecoin activities, transitioning from informal guidance to formal regulatory rule-making. This statutory framework grants the FDIC specific powers to approve stablecoin applications, establish operational standards, and impose conditions on stablecoin issuance based on prudential considerations and consumer protection principles. Congress's intent in passing the GENIUS Act reflects an acknowledgment of the significant advantages offered by regulated bank-issued stablecoins over unregulated alternatives, including direct oversight, deposit insurance protection for reserve funds, and integration with existing banking infrastructure. The Act arises from a bipartisan consensus on the need for U.S. financial institutions to have clear authorization to compete in the digital asset market without regulatory constraints. Banks seeking GENIUS Act stablecoin regulatory approval operate under a statutory framework that requires coordination from the Federal Reserve on policy matters affecting the banking system while maintaining the FDIC's authority for individual institution approvals. The Act specifically considers that payment stablecoin subsidiary issuers will operate as specialized entities focused on stablecoin activities to prevent cross-contamination between payment token operations and traditional deposit activities. This legislative structure creates regulatory separation, protecting depositors while fostering innovation in the payment system.

The 120-day automatic approval mechanism is reshaping the regulatory timeline.

The most transformative element of the FDIC framework involves a 120-day automatic approval mechanism, representing a fundamental shift in the regulatory process and establishing a specific timeline for regulatory inaction to trigger approval, rather than an indefinite consideration period. Under this mechanism, when a bank submits a complete application demonstrating compliance with all specified requirements, the FDIC has 120 calendar days to approve or deny the request. If the agency takes no action during this period, the application will be automatically approved, thereby eliminating the historically indefinite regulatory dilemma faced by banks in their applications. This automatic approval provision significantly accelerates the process for banks to issue stablecoins with FDIC approval by creating enforceable deadlines and eliminating strategic delays that regulators might use to postpone decisions on new activities. The 120-day standard reflects Congress's recognition that financial innovation requires a regulatory timeline aligned with business realities, rather than indefinite administrative discretion. As a result, banks can plan for capital deployment, infrastructure development, and stablecoin product launches, and determine that regulatory decisions will be concluded within the specified timeframe. The automatic approval mechanism establishes that regulatory inaction does not constitute denial, fundamentally reversing the traditional administrative law principle where silence typically means denial or continued administrative consideration. This procedural innovation incentivizes regulators to complete substantive reviews within the designated timeframe, rather than delaying decisions while waiting for further information collection. Within the 120-day period, the FDIC has the authority to request additional information or clarification regarding application materials, and responses to such requests may temporarily pause the clock, allowing the agency ample opportunity to provide supplementary documentation. However, the agency cannot indefinitely postpone approvals through endless information requests; regulators must reach a final decision within the entire timeframe. The automatic approval mechanism has significant implications for how banking institutions construct their stablecoin compliance readiness, as institutions can develop operational timelines based on fixed regulatory conclusion dates. This certainty reduces execution risk and makes capital allocation for stablecoin infrastructure more efficient. Blockchain developers and fintech professionals working with traditional banks have embraced this regulation as it creates a predictable project timeline consistent with product development roadmaps. Regulatory compliance experts recognize that the 120-day standard transforms the stablecoin compliance FDIC framework from indefinite regulatory oversight to a time-bound process, fundamentally changing how institutional investors assess the viability of stablecoins issued by banks as settlement tools. The automatic approval provision represents a policy acknowledgment that excessive regulatory delays compared to a more streamlined approval process in the international banking system can impose competitive costs on U.S. financial institutions. Congress and the FDIC have created strong incentives for regulators to effectively complete substantive reviews by automatically approving after 120 days of inaction, rather than treating administrative delays as a de facto policy tool. This mechanism benefits cryptocurrency investors by establishing a clear timeline for the availability of institutional stablecoins, creating a predictable infrastructure adoption timeline that benefits institutional investors.Web3 entrepreneurEnable a partnership program with banking institutions operating under a known regulatory timeframe.