What Did the FDIC Propose?
The proposed rulemaking
In December 2025, the FDIC issued a proposed rulemaking. It sets out how FDIC-supervised depository institutions can create subsidiaries that operate as “permitted payment stablecoin issuers” (PPSIs) under the GENIUS Act. The rule defines three things: the application process, the documentation requirements, and the evaluation standards a bank must meet to issue stablecoins.
Defining payment stablecoins
The GENIUS Act defines “payment stablecoins” as digital assets built to serve as payment or settlement instruments. The issuer must convert or repurchase them at a fixed monetary value and hold their value stable against a fixed amount. They are not national currencies, deposits, or securities.
What must banks include?
Stablecoin and Activity Description
Applicants describe the proposed stablecoin: its features, its issuance and redemption mechanics, the roles of the parent bank and the subsidiary, and any third-party involvement. They also explain how they will hold value stable through sources of strength, guarantees, and intercompany agreements.
Financial Disclosures
Applications include planned capital and liquidity structures, reserve asset composition and management plans (including tokenized reserves), and three-year financial projections that show the subsidiary is viable.
Governance Documentation
Banks provide ownership and control structures, organizing documents, and the proposed directors, officers, and principal shareholders. They must also disclose any felony convictions among key personnel.
Operational Policies
Policies must cover custody, asset segregation, recordkeeping, and transaction reconciliation. They must also cover Bank Secrecy Act, countering the financing of terrorism, and sanctions compliance.
Auditor Engagement
Applicants supply an engagement letter with a registered public accounting firm. The firm examines and certifies the monthly reserve reports.
How will the FDIC evaluate?
The FDIC will assess five areas:
Reserve Maintenance
Can the subsidiary maintain identifiable 1:1 reserves in permitted asset classes, with monthly public disclosures and FDIC-certified reports?
Regulatory Compliance
Is the applicant ready to meet forthcoming FDIC regulations on capital, liquidity, reserve diversification, and operational and IT risk management?
Permissible Activities
Are operations limited to issuing and redeeming stablecoins, managing reserves, and providing custodial and safekeeping services? Pledging, rehypothecating, or reusing reserve assets is prohibited.
Management Integrity
Do the directors and officers show competence, experience, a clean compliance history, and no specified felony convictions?
Redemption Policy
Are redemption policies clear and conspicuous, with timely redemption capability, plain-language fee disclosure, and a seven-day notice requirement for fee changes?
What Is the Application Timeline?
The process moves fast by regulatory standards. An application is deemed substantially complete unless the FDIC flags it as insufficient within 30 days of submission. Once it is complete, the FDIC must approve or deny it within 120 days. That gives institutions a window of roughly five months from submission to decision.
What should banks consider?
The proposed rule tells early movers to build real internal capability first. A bank weighing stablecoin issuance should assess four things: the impact on institutional strategy, the due diligence required for technology and custody partners, the in-house expertise needed across compliance, technology, and digital asset operations, and its fee structures and customer disclosure obligations.
The Coinbax Perspective
The FDIC’s proposed application process confirms what the industry expected: stablecoin issuance through regulated bank subsidiaries will require institutional-grade infrastructure from day one. The documentation requirements run from reserve management to BSA/AML compliance to redemption policies. This is not a lightweight regulatory exercise.
For banks and credit unions weighing this opportunity, the rule’s focus on custody, asset segregation, transaction reconciliation, and real-time compliance maps directly to the infrastructure Coinbax provides. Programmable escrow segregates reserves. Built-in reversibility handles redemption policy requirements. Real-time compliance monitoring satisfies the BSA/CFT obligations every applicant must demonstrate. Institutions that build this now will be ready to submit complete, credible applications when the final rule takes effect.
Frequently Asked Questions
What is a permitted payment stablecoin issuer?
Under the GENIUS Act, a permitted payment stablecoin issuer (PPSI) is a subsidiary of an FDIC-supervised depository institution approved to issue payment stablecoins: digital assets designed for payment and settlement that hold a stable value relative to a fixed monetary amount.
Can banks issue stablecoins directly?
No. A bank must set up a subsidiary to issue stablecoins. The parent bank and the subsidiary have defined roles, and the subsidiary operates under specific activity limits.
What reserve assets are permitted?
Permitted reserves include U.S. currency, demand deposits at insured depository institutions, Treasury bills and notes with a 93-day maximum maturity, overnight repurchase agreements backed by short-term Treasuries, money market funds, and tokenized reserve assets that comply with applicable law.
Can the subsidiary do anything besides issue stablecoins?
Activities are strictly limited to issuing and redeeming stablecoins, managing reserves, and providing custodial and safekeeping services. The subsidiary cannot pledge, rehypothecate, or reuse reserve assets for any other purpose.
How long does the approval process take?
The FDIC has 30 days to flag an incomplete application and 120 days after receiving a substantially complete application to issue a decision, roughly five months from submission to approval or denial.
