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FDICs Proposed Stablecoin Rules Face Strong Opposition Over Risk Concerns
On June 9 2026, Christopher Appel, Director of Banking Policy at the nonprofit Better Markets, released a statement criticizing the Federal Deposit Insurance Corporation’s (FDIC) plan to bring payment stablecoins under its regulatory umbrella. Appel said the FDIC’s proposal, which is part of the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), would “import all the volatility and illicit finance risks of the crypto market into the United States’ federally insured banking system without the strong rules necessary to apply prudent standards to these risky products.”
The FDIC’s draft rule would treat reserves held by stablecoin issuers in insured banks as corporate deposits, making those reserves eligible for FDIC insurance. However, holders of the stablecoins themselves would not receive pass‑through coverage. The proposal relies largely on supervisory discretion for capital requirements and does not establish robust reserve diversification or liquidity frameworks, according to Appel. He compared the rule to the Office of the Comptroller of the Currency’s earlier stablecoin proposal, which faced similar criticism for lacking safeguards.
Appel cited the March 2023 incident involving Circle’s USD Coin (USDC) as evidence that the absence of strong protections can lead to systemic risk. USDC fell to $0.87 from its $1 peg after only 8 % of its reserves were deposited at Silicon Valley Bank. The FDIC invoked its systemic‑risk exception to prevent contagion, costing the Deposit Insurance Fund (DIF) nearly $17 billion. The DIF, which backs insured deposits up to $250,000 per depositor per institution, had already been strained during the 2008 financial crisis, when it fell to nearly –$21 billion and took almost a decade to recover.
The FDIC’s stablecoin proposal is part of a broader regulatory effort to bring the rapidly growing stablecoin sector under federal oversight. The GENIUS Act, enacted in 2025, requires payment stablecoins to be backed one‑for‑one by U.S. dollars or other low‑risk assets. The FDIC’s draft rules, released in early 2026, aim to define stablecoin issuer applications and prudential obligations, but critics argue that the framework does not adequately address liquidity or reserve diversification.
As of the fourth quarter of 2025, the Deposit Insurance Fund stood at $153.9 billion, a reserve ratio of 1.42 %. The FDIC, created by the Banking Act of 1933, insures deposits in member banks but does not cover deposits held by non‑bank fintech firms. The proposed stablecoin rule would extend the FDIC’s reach to corporate deposits held by stablecoin issuers, potentially exposing the fund to new types of risk.
Better Markets, which describes itself as a non‑partisan organization focused on financial reform, urged the FDIC to make significant changes to its oversight approach. The organization highlighted the agency’s staff attrition and the lack of expertise in supervising crypto‑related activities as factors that could create a “stablecoin‑triggered banking panic.”
The FDIC has indicated that it will continue to review the draft rules and that final regulations will be issued after stakeholder comment periods. The outcome of this process will determine whether stablecoin issuers can operate within the U.S. banking system without imposing additional risk on the Deposit Insurance Fund and, by extension, on taxpayers.
In the meantime, the debate over stablecoin regulation underscores the broader challenge of integrating digital assets into a system that has historically been designed for traditional fiat‑based banking. The next few months will be critical as regulators, industry participants, and consumer advocates weigh the potential benefits of stablecoins against the risks highlighted by Better Markets and other critics.
The FDIC’s draft rule would treat reserves held by stablecoin issuers in insured banks as corporate deposits, making those reserves eligible for FDIC insurance. However, holders of the stablecoins themselves would not receive pass‑through coverage. The proposal relies largely on supervisory discretion for capital requirements and does not establish robust reserve diversification or liquidity frameworks, according to Appel. He compared the rule to the Office of the Comptroller of the Currency’s earlier stablecoin proposal, which faced similar criticism for lacking safeguards.
Appel cited the March 2023 incident involving Circle’s USD Coin (USDC) as evidence that the absence of strong protections can lead to systemic risk. USDC fell to $0.87 from its $1 peg after only 8 % of its reserves were deposited at Silicon Valley Bank. The FDIC invoked its systemic‑risk exception to prevent contagion, costing the Deposit Insurance Fund (DIF) nearly $17 billion. The DIF, which backs insured deposits up to $250,000 per depositor per institution, had already been strained during the 2008 financial crisis, when it fell to nearly –$21 billion and took almost a decade to recover.
The FDIC’s stablecoin proposal is part of a broader regulatory effort to bring the rapidly growing stablecoin sector under federal oversight. The GENIUS Act, enacted in 2025, requires payment stablecoins to be backed one‑for‑one by U.S. dollars or other low‑risk assets. The FDIC’s draft rules, released in early 2026, aim to define stablecoin issuer applications and prudential obligations, but critics argue that the framework does not adequately address liquidity or reserve diversification.
As of the fourth quarter of 2025, the Deposit Insurance Fund stood at $153.9 billion, a reserve ratio of 1.42 %. The FDIC, created by the Banking Act of 1933, insures deposits in member banks but does not cover deposits held by non‑bank fintech firms. The proposed stablecoin rule would extend the FDIC’s reach to corporate deposits held by stablecoin issuers, potentially exposing the fund to new types of risk.
Better Markets, which describes itself as a non‑partisan organization focused on financial reform, urged the FDIC to make significant changes to its oversight approach. The organization highlighted the agency’s staff attrition and the lack of expertise in supervising crypto‑related activities as factors that could create a “stablecoin‑triggered banking panic.”
The FDIC has indicated that it will continue to review the draft rules and that final regulations will be issued after stakeholder comment periods. The outcome of this process will determine whether stablecoin issuers can operate within the U.S. banking system without imposing additional risk on the Deposit Insurance Fund and, by extension, on taxpayers.
In the meantime, the debate over stablecoin regulation underscores the broader challenge of integrating digital assets into a system that has historically been designed for traditional fiat‑based banking. The next few months will be critical as regulators, industry participants, and consumer advocates weigh the potential benefits of stablecoins against the risks highlighted by Better Markets and other critics.
