The Federal Deposit Insurance Corp. will propose a rule explicitly barring stablecoin holders from "pass-through" insurance, closing a potential loophole in the GENIUS Act, Chairman Travis Hill said Wednesday.
The GENIUS Act already bans direct FDIC coverage for stablecoins, but was silent on whether third-party financial firms could obtain that protection on holders' behalf.
Hill said the proposed rule would shut that door as well.
He made the remarks at an American Bankers Association summit in Washington as federal agencies continue rolling out GENIUS Act implementation rules.
What Happened
Under the GENIUS Act, stablecoins such as Circle's USDC and Tether's USDT are explicitly distinguished from bank deposits, which carry up to $250,000 in federal guarantees.
Hill said the pass-through prohibition aligns with that intent, even though the statute does not address the arrangement explicitly.
He noted that current pass-through rules require end-customer identities to be readily ascertainable - a standard not commonly met by large stablecoin arrangements today.
Hill also said the FDIC's preliminary view is that tokenized deposits - bank deposits represented as programmable blockchain tokens, which the GENIUS Act does not cover - should receive the same insurance treatment as conventional deposits.
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Why It Matters
The FDIC's proposed rule arrives as banking-sector concern over stablecoin competition is intensifying.
A Jefferies report published Tuesday estimates stablecoin growth could generate 3% to 5% core deposit runoff at U.S. banks over five years, cutting average bank earnings by roughly 3%. The sector's market cap has grown from $184 billion in 2022 to around $314 billion today, according to DefiLlama.
Banks have argued that allowing yield on stablecoins - a provision under debate in the Digital Asset Market Clarity Act - would pull depositors away.
White House crypto adviser Patrick Witt has called those objections attempts to turn an innovation bill into an anti-competition measure. The FDIC's GENIUS Act comment period runs to May 18, 2026, with final rules due July 18.
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