FDIC to Exclude Stablecoins From Pass-Through Insurance: Chairman Travis Hill

At a Washington forum, agency leaders outlined a forthcoming proposal on the insurance treatment of payment stablecoins and how federal deposit-insurance concepts apply to bank-held reserve arrangements.

Key Developments: FDIC and Stablecoin Insurance

• Payment stablecoins do not currently receive FDIC pass-through coverage, and the FDIC intends to propose rules to keep them from qualifying.
• Hill said the GENIUS Act already bars payment stablecoins from accessing federal deposit insurance.
• He argued that describing stablecoin holders as insured, even on a pass-through basis, conflicts with the statute’s prohibition.

Regulatory Context and Next Steps

Since enactment of the Guiding and Establishing National Innovation for U.S. Stablecoins, the Federal Deposit Insurance Corporation and other financial regulators have been evaluating how the statute will affect the broader U.S. financial system. In practice, the framework aims to separate stablecoin liabilities from insured-deposit status, constrain how insurance-related terms can be used in connection with payment stablecoins, and fit stablecoin reserve arrangements into existing bank supervision and consumer-protection expectations.

The measure was designed to establish guardrails for payment stablecoins. Soon after President Donald Trump signed it, Consumer Reports criticized the law for omitting federal deposit insurance protection against consumer losses, providing insufficient federal oversight, and not requiring third-party reserve audits.

The FDIC is now weighing what safeguards should apply, including what banks must do operationally when they provide accounts or custody services connected to stablecoin reserves. That can include heightened documentation and recordkeeping, tighter disclosures and marketing controls to avoid confusing customers about insurance status, clearer contractual terms with stablecoin issuers and program managers, and examination-ready controls over reserve placement, segregation, and reporting. If the proposed approach is adopted, banks could face supervisory criticism or enforcement consequences for misstatements about insurance coverage, weak controls around reserve accounts, or structures that blur the line between deposit products and stablecoin programs.

Pass-through insurance allows deposits placed at a bank by a third party to be insured as though the end customer deposited the funds directly. Eligibility generally depends on the funds being insured deposits held at an FDIC-insured institution, the deposit being maintained in a qualifying custodial or fiduciary capacity, and the institution (and custodian) keeping reliable records that identify each beneficial owner and their respective interest. That model differs from payment stablecoins, where the token typically represents a claim on an issuer or program arrangement rather than a direct deposit relationship between the holder and the bank. It also differs from tokenized deposits, which are generally structured as a bank deposit liability represented in token form, with any insurance analysis flowing from the underlying deposit account rather than from the token’s circulation.

Pass-through insurance is built around traceable beneficial ownership of a deposit account at an insured bank, not a freely transferable token whose holder may change without any direct banking relationship.

Hill indicated the agency wants to settle the rules for payment stablecoins not subject to the GENIUS Act on an expedited basis. For now, whether such assets would qualify for pass-through protection remains unresolved, he said.

We should resolve this by regulation—before any bank holding stablecoin reserves fails—so expectations about the availability of FDIC insurance are clear, Hill said.

Separately, Congress is considering the Clarity Act, a companion proposal that would spell out which regulatory agencies are responsible for various aspects of stablecoin oversight.

Outside the FDIC debate, the Treasury Department has generally signaled that anti-money-laundering expectations should reach DeFi participants that exercise control or provide user access points, such as front-end interface operators, entities that administer or control protocol parameters, and service providers that route, aggregate, or facilitate transactions. In that view, the compliance baseline would mirror established AML program expectations, including risk-based customer due diligence, sanctions screening, suspicious activity monitoring and reporting, and recordkeeping obligations where applicable.

The Bank of England has broadly emphasized that stablecoin arrangements used for payments should meet high standards for safety, soundness, and redemption. In that context, it has cautioned that self-hosted usage can raise supervision and enforcement challenges, and it has pointed toward stronger requirements for issuers and relevant intermediaries around governance, operational resilience, and financial-crime controls when stablecoins are intended for wider payment use.

In the Senate, stablecoin “rewards” or incentive features have been discussed as a policy flashpoint because they can resemble interest-like returns or promotional inducements. Legislative and oversight debates have focused on whether issuer-paid rewards should be limited or conditioned to reduce consumer confusion about deposit-like products and to avoid creating de facto yield-bearing instruments outside bank regulation.

In Hong Kong, banks have explored tokenized deposit and stablecoin-adjacent pilots, but specific plans by individual banks to issue stablecoins are not uniformly public or finalized in a way that allows a definitive list of named issuers in this context. Where activity exists, it is generally framed as contingent on licensing, supervisory approval, and the final shape of local stablecoin rules.

The DTCC has described digital cash settlement as a way to modernize post-trade processing by pairing tokenized assets with tokenized or digitally represented cash for delivery-versus-payment. The concept has been positioned as phased experimentation moving toward broader scope, with a focus on operational resilience, interoperability with existing market infrastructure, and technology choices that can support near-real-time settlement without disrupting established risk controls.