The Federal Deposit Insurance Corp. (FDIC) initiated formal rulemaking Tuesday to allow insured banks to issue payment stablecoins, introducing a “120-day clock” that automatically approves applications if the agency fails to act in time.
The proposal, approved by the FDIC Board of Directors, implements key provisions of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, signed into law by President Donald Trump in July. Under the new framework, FDIC-supervised institutions, including state nonmember banks and savings associations, must apply to issue stablecoins through dedicated subsidiaries.
“The FDIC would adopt a tailored application process that would enable the FDIC to evaluate the safety and soundness of an applicant’s proposed activities… while minimizing the regulatory burden,” Acting FDIC Chairman Travis Hill said in a statement.
The 120-Day Shot Clock
The proposed rule, now open for a 60-day public comment period, establishes a strict timeline designed to eliminate the “pocket vetoes” that previously left crypto firms in regulatory limbo.
Under the plan, the FDIC must notify applicants if their file is complete within 30 days. Once deemed complete, the agency has 120 days to issue a decision. Crucially, the rule states that applications not acted upon within this window will be deemed approved by default.
Banks will not issue tokens directly from their balance sheets; issuance must occur through a bankruptcy-remote subsidiary to ring-fence risks. These issuers are required to maintain 1:1 reserves in “high-quality, liquid assets,” such as U.S. Treasury bills or cash.
Industry Impact
The move signals a pivot from “regulation by enforcement” to a permissioned integration of digital assets. Previously, the Office of the Comptroller of the Currency (OCC) and FDIC relied on interpretive letters requiring “non-objection” before banks could engage in crypto activities, a process critics described as opaque and effectively a ban.
This proposal operationalizes the GENIUS Act, which mandated that federal agencies create a pathway for both non-bank and bank issuers. While the law allows for state-regulated trust companies to issue tokens, the FDIC’s rule ensures federally insured banks can compete directly.
However, the “automatic approval” mechanism may face scrutiny during the comment period. Consumer advocates have historically warned that default approvals could allow risky products to slip through the cracks if the agency becomes overwhelmed by applications.
The agency also clarified that while the issuing banks are FDIC-insured, the stablecoins themselves do not qualify for deposit insurance. The safety of the tokens relies strictly on the segregated reserve assets.
Market Reaction
The proposal comes as the crypto market faces headwinds, with Bitcoin trading below $87,000 on Wednesday. Yet, traditional financial stocks showed little movement, suggesting the market views this as a long-term infrastructure play rather than an immediate revenue driver.
“This is the first regulatory framework from a federal banking agency since the GENIUS Act became law,” Acting Chairman Hill noted during the open meeting. Nicholas Simons, FDIC counsel, added that the goal is to “support the responsible growth” of digital assets while maintaining safety and soundness.
Chain Street’s Take
The moat around incumbent stablecoin giants is officially shrinking. For years, Tether and Circle dominated because banks were legally sidelined. Now, with a federally mandated 120-day approval shot clock, banks like JPMorgan or BNY Mellon can deploy their own programmable dollars with regulatory cover. The real story here isn’t the rules themselves, but the “automatic approval” clause. It forces the FDIC to move at the speed of the market, not the speed of bureaucracy. The race for the first “checking account on-chain” just began.
