What Did the FDIC Propose?
In December 2025, the FDIC issued a proposed rulemaking establishing how FDIC-supervised depository institutions can create subsidiaries operating as “permitted payment stablecoin issuers” (PPSIs) under the GENIUS Act. The rule defines the application process, documentation requirements, and evaluation standards that banks must meet to enter the stablecoin issuance space.
Under the GENIUS Act’s definition, “payment stablecoins” are digital assets designed as payment or settlement instruments where issuers must convert or repurchase at a fixed monetary value while maintaining stable value relative to a fixed amount. They are distinct from national currencies, deposits, or securities.
What Must Banks Include in Their Applications?
Stablecoin and Activity Description
Applicants must detail their proposed stablecoin’s features, issuance and redemption mechanics, the respective roles of the parent bank and subsidiary, any third-party involvement, and their approach to maintaining stable value through sources of strength, guarantees, and intercompany agreements.
Financial Disclosures
Applications require planned capital and liquidity structures, reserve asset composition and management plans (including tokenized reserves), and three-year financial projections demonstrating the subsidiary’s viability.
Governance Documentation
Banks must provide ownership and control structures, organizing documents, proposed directors, officers, and principal shareholders, along with disclosure of any felony convictions among key personnel.
Operational Policies
Required policies must cover custody, asset segregation, recordkeeping, transaction reconciliation, and Bank Secrecy Act, countering the financing of terrorism, and sanctions compliance.
Auditor Engagement
Applicants need an engagement letter with a registered public accounting firm for monthly reserve report examination and certification.
How Will the FDIC Evaluate Applications?
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 — Does the applicant demonstrate readiness to adhere to 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 demonstrate competence, experience, compliance history, and absence of 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 quickly by regulatory standards. Applications are deemed substantially complete unless the FDIC indicates insufficiency within 30 days of submission. Once deemed complete, the FDIC must issue approval or denial no later than 120 days — giving institutions a roughly five-month window from submission to decision.
What Should Banks Consider Before Applying?
The proposed rule signals that early movers will need robust internal capabilities. Banks evaluating stablecoin issuance should assess the impact on institutional strategy, third-party due diligence requirements for technology and custody partners, internal expertise needs across compliance, technology, and digital asset operations, and fee structures and customer disclosure obligations.
The Coinbax Perspective
The FDIC’s proposed application process confirms what the industry anticipated: stablecoin issuance through regulated bank subsidiaries will require institutional-grade infrastructure from day one. The documentation requirements — covering everything from reserve management to BSA/AML compliance to redemption policies — make clear that this is not a lightweight regulatory exercise.
For banks and credit unions evaluating this opportunity, the emphasis on custody, asset segregation, transaction reconciliation, and real-time compliance capabilities maps directly to the trust infrastructure that Coinbax provides. Programmable escrow ensures reserve segregation. Built-in reversibility addresses redemption policy requirements. Real-time compliance monitoring satisfies the BSA/CFT obligations that every applicant must demonstrate. The institutions that build this infrastructure now will be positioned 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 that has been approved to issue payment stablecoins — digital assets designed for payment and settlement that maintain a stable value relative to a fixed monetary amount.
Can banks issue stablecoins directly?
No. Under this framework, banks must establish subsidiaries to serve as stablecoin issuers. The parent bank and subsidiary have defined roles, with the subsidiary operating under specific activity limitations.
What reserve assets are permitted?
Permitted reserves include U.S. currency, demand deposits at insured depository institutions, Treasury bills and notes with 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.