FDIC Proposes Application Requirements for Payment Stablecoin Issuance by State Nonmember Bank Subsidiaries

Summary

Today, the Board of the Federal Deposit Insurance Corporation (the “FDIC”) unanimously approved a notice of proposed rulemaking (the “NPRM”) that would implement application requirements and related procedures for any state nonmember bank or state savings association that seeks to issue payment stablecoins through a subsidiary.[1] The proposed rules are required under the Guiding and Establishing National Innovation for U.S. Stablecoins Act (also known as the GENIUS Act) and are the first rules to be proposed under the Act. As discussed below, the NPRM is likely to be followed by several other proposals, many of which are required by the statute to be finalized no later than July 18, 2026.

Comments on the NPRM are due 60 days after its publication in the Federal Register.

Proposed Rules

The GENIUS Act, which was enacted on July 18, 2025, establishes a federal regulatory framework for “payment stablecoins” and their issuers. The statute generally limits the issuance of payment stablecoins in the United States to “permitted payment stablecoin issuers” (“PPSIs”).[2]

The GENIUS Act contemplates three regulatory “pathways” for an entity to become a PPSI.[3] The NPRM relates to only one of these pathways: an insured depository institution (an “IDI”) may apply to its primary federal regulator to issue stablecoins through a subsidiary, and, if approved, that subsidiary will be a PPSI. The other two pathways apply to entities other than IDIs and their subsidiaries—a federal pathway available to nonbank entities, uninsured national banks and federal branches of foreign banks, which may become PPSIs with approval of the OCC, and a state pathway available to entities established under state law, which may become PPSIs with approval of a state payment stablecoin regulator.[4]

Under the GENIUS Act, the FDIC is responsible for reviewing applications from any state nonmember bank that seeks to issue payment stablecoins through a subsidiary.[5] The GENIUS Act requires that, in considering these applications, the FDIC evaluates only the following factors:[6]

• the ability of the prospective PPSI to satisfy applicable requirements in the GENIUS Act;
• the management of the prospective PPSI, including the competence, experience and integrity of the entity’s officers, directors and principal shareholders and that no officer or director has been convicted of specified financial crimes;
• whether the prospective PPSI’s policy for redeeming its payment stablecoins complies with the GENIUS Act’s requirements;[7] and
• any other factors established by the applicable regulator that are necessary to ensure the prospective PPSI’s safety and soundness.

The NPRM states that the FDIC intends to minimize regulatory burden by requesting information only as necessary to evaluate an application against the statutory factors expressly included in the GENIUS Act, without considering any additional factors. Because GENIUS Act applications submitted to the FDIC will in all cases be submitted by state nonmember banks already subject to FDIC regulation, the FDIC would, wherever possible, rely on information already available to it as regulator of the applicant bank.

To enable it to receive the information that it needs to assess an application against the factors set out in the GENIUS Act, the FDIC would require a letter application that includes information as to the following topics:

• the proposed payment stablecoin and the proposed activities of the prospective PPSI, including any related activities that will be undertaken by the parent bank;
• the financial condition of the prospective PPSI, including its capital, liquidity and reserve assets and pro forma financial information for its first three years of operations;
• the prospective PPSI’s ownership, control and management, including its proposed directors, officers and principal shareholders (if different from the parent bank);
• relevant policies, procedures and customer agreements of the prospective PPSI; and
• an engagement letter with a registered public accounting firm that will, as required by the GENIUS Act, perform a monthly examination of the reserves for outstanding payment stablecoins.

The NPRM would also implement specific timelines for the FDIC’s consideration of applications under the GENIUS Act. These timelines correspond directly to provisions of the statute. The NPRM would track the GENIUS Act in, for example, requiring the FDIC to notify an applicant within 30 days of receiving an application as to whether the application is “substantially complete” and to render a decision within 120 days of receiving a substantially complete application. The NPRM also implements statutorily required procedures and timelines for application denials and related appeals.

Next Steps

The GENIUS Act requires that all the primary federal payment stablecoin regulators, the Treasury Secretary and various state regulators promulgate various regulations to carry out the GENIUS Act.[8] Many of these regulations are required to be issued in final form by July 18, 2026, in advance of the statute taking effect on the earlier of (i) 120 days after the date on which the primary federal payment stablecoin regulators issue final regulations implementing the GENIUS Act and (ii) January 18, 2027 (18 months from the statute’s enactment).

The FDIC’s NPRM is the first of several proposed rules that will be forthcoming from federal regulators and the Treasury Department. The agencies have already confirmed that work is in underway on these rules: FDIC Acting Chairman Travis Hill stated during the FDIC’s Board meeting that an additional proposal to implement capital, liquidity, risk management and other requirements applicable under the GENIUS Act to PPSIs regulated by the FDIC will be issued in the coming months. Leaders of the other primary federal payment stablecoin regulators stated in congressional testimony earlier this month that their agencies are developing rules under the GENIUS Act. The Treasury Department also previously issued an advance notice of proposed rulemaking, seeking comments on the rules that it will propose under the statute, with comments on that notice required to be submitted by early November.[9]