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Federal deposit insurance will not apply to stablecoins under the new U.S. regulatory framework, according to remarks made Wednesday by Federal Deposit Insurance Corporation Chairman Travis Hill.
Speaking at an American Bankers Association summit in Washington, Hill said the agency plans to propose a rule explicitly preventing stablecoin holders from accessing FDIC protections. The proposal would also prohibit so-called pass-through insurance structures that might otherwise extend deposit guarantees indirectly to stablecoin users.
The clarification arrives as federal regulators continue building the rulebook around the GENIUS Act, a law signed in July that establishes the first comprehensive federal framework for payment stablecoins.
Closing the Pass-Through Insurance Door
Hill said the FDIC’s forthcoming rule will ensure that stablecoins remain outside the federal deposit insurance system, even in situations where stablecoin issuers hold reserves inside insured banks.
Pass-through insurance typically allows third-party financial platforms such as fintech companies or broker-dealers to hold deposits at a bank on behalf of customers. In those arrangements, each end user can receive individual deposit insurance coverage rather than the account being treated as a single corporate deposit.
Hill indicated that the FDIC intends to prevent stablecoin arrangements from using that mechanism.
Under existing rules, pass-through insurance requires financial institutions to clearly identify the underlying customers whose funds are being held. Hill noted that most large stablecoin systems do not currently meet that standard, which further complicates attempts to extend deposit protections to token holders.
Tokenized Deposits Treated Differently
Hill also addressed the regulatory treatment of tokenized deposits, which represent traditional bank deposits issued or recorded on blockchain infrastructure.
According to Hill, the FDIC’s preliminary view is that these products should be treated as ordinary deposits for regulatory purposes. That means they would remain eligible for the standard $250,000 FDIC insurance coverage regardless of whether the balance is recorded on a blockchain.
The distinction represents a key difference regulators are increasingly drawing between stablecoins issued by nonbank entities and tokenized versions of conventional bank deposits. It's a distinction that clearly (and frustratingly) holds back onchain finance in favor of protecting the old guard.
Banks Watch Stablecoin Growth Closely
The policy discussion comes as banks increasingly scrutinize the growth of the stablecoin market.
Analysts at Jefferies said this week that rising stablecoin adoption could reduce core deposits at U.S. banks by roughly 3% to 5% over the next five years. Banking groups have warned that the expansion of digital dollar tokens could shift funds away from traditional institutions.
Industry organizations such as the American Bankers Association have also argued that regulators should prevent stablecoin issuers from offering interest or yield products that might compete directly with bank accounts.
At the same time, some policymakers and crypto industry advocates say stablecoins can expand financial innovation and payment efficiency if regulated properly.
Implementation Timeline
The GENIUS Act establishes a phased implementation process for federal agencies.
The law will take full effect either 18 months after its signing or 120 days after regulators finalize the required implementing rules, whichever occurs first. Agencies including the FDIC and the Treasury Department are currently drafting those regulations.
Hill’s remarks signal that the FDIC intends to settle one of the law’s key open questions early: stablecoins may operate within the regulated financial system, but they will not come with the same government insurance that protects bank deposits.
