FDIC Requests Comments on Proposed Procedures for State Banks to Issue Stablecoins

The FDIC solicited comments on proposed procedures for an FDIC-insured State nonmember bank or State savings association seeking approval to issue payment stablecoins through a subsidiary pursuant to the Guiding and Establishing National Innovation for U.S. Stablecoins Act ("GENIUS Act").

The proposed rule would implement GENIUS Act Section 5 ("Approval of Subsidiaries of Insured Depository Institutions and Federal Qualified Payment Stablecoin Issuers") by establishing procedures for evaluating applications based on statutory factors, "processing applications within specified timeframes, and [creating] an appeal process" for denied applications.

Specifically, proposed Rule 303.252 ("Permitted Payment Stablecoin Issuers or PPSI") would require the following

1. Contents of Filing (Proposed Section 303.252(d))

The application, which would be submitted to the appropriate FDIC region, must contain information necessary to evaluate safety and soundness factors under Section 5(c) ("Factors to Be Considered") of the GENIUS Act, including:

• Activity Description: Details on the proposed stablecoin, the mechanism for maintaining stable value, and any incidental activities.
• Financial Information: Planned capital and liquidity structure, reserve asset composition/management plans, and 3-year financial projections.
• Ownership and Control: Organizational charts, organizing documents, and lists of directors/officers (including confirmation regarding felony convictions for financial crimes).
• Policies and Procedures: Documentation covering custody, segregation of assets, recordkeeping, redemption (per GENIUS Act Section 4(a)(1)(B)) ("Requirements for Issuing payment Stablecoins, Standards") and BSA/AML/Sanctions compliance.
• Audit Engagement: An engagement letter with a registered public accounting firm.

2. Processing Timelines (Proposed Section 303.252(f) & (g))

The proposed rule would establish strict statutory timelines for processing:

• Completeness Review (30 Days): The FDIC must notify the applicant within 30 days of receipt if the application is "substantially complete."
  • If incomplete, the FDIC will specify missing information.
  • If the FDIC fails to notify within 30 days, the application is deemed substantially complete as of the receipt date.
• Decision Period (120 Days): The FDIC must approve or deny the application no later than 120 days after receiving a substantially complete application.
• Deemed Approval: If the FDIC does not render a decision within the 120-day window, the application is deemed approved.

3. Decisions and Standards

• Approval: The FDIC may approve the application with conditions (standard or specific), provided those conditions do not impose requirements beyond Section 4 of the GENIUS Act.
• Denial: The FDIC shall deny an application only if the activities would be unsafe or unsound based on the factors in Section 5(c) of the GENIUS Act.
  • Written notice of denial must be provided within 30 days of the decision.
  • The notice must explain findings and material shortcomings with specificity.

4. Appeals Process (Proposed Section 303.252(h))

If an application is denied, the applicant provides specific appeal rights:

• Request: The applicant may request a written or oral hearing within 30 days of receiving the denial notice.
• Hearing: The hearing must take place within 30 days of the request.
• Final Determination: The FDIC must issue a final determination with specific findings no later than 60 days after the hearing.