On December 16, 2025, the Federal Deposit Insurance Corporation (FDIC) issued a notice of proposed rulemaking (NPR). The NPR establishes the application process for FDIC-supervised depository institutions to obtain approval for a subsidiary to issue payment stablecoins under the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. The GENIUS Act established a statutory framework for the issuance and transaction of payment stablecoins. Stablecoins retain the benefit of digital assets, including high-speed, low-cost, and decentralized transactions, while ameliorating some risks by being tied to a fiat currency. The FDIC’s recent NPR is its first formal action to implement the statute and opens a 60 day public comment period following publication in the Federal Register.
Scope of FDIC authority under the GENIUS Act
The GENIUS Act creates a federal licensing and supervisory framework for “permitted payment stablecoin issuers” (PPSIs), assigning primary regulatory responsibility across agencies based on issuer type. For subsidiaries of FDIC supervised insured depository institutions (IDIs)—namely insured state nonmember banks and state savings associations—the FDIC is the primary federal payment stablecoin regulator. Under the NPR, IDIs must apply for FDIC approval before a subsidiary may issue payment stablecoins. Once approved, the PPSI is limited to statutorily enumerated activities, including issuance, redemption, and reserve management and custody considerations. Because payment stablecoins will be tied to a stable currency valuation, issuers will have to demonstrate adequate liquidity, risk management procedures, and diversified reserves. The FDIC will continue to promulgate rules building out regulations for these requirements.
Overview of the proposed rule
The NPR would add a new section to the Federal Register (at 12 C.F.R. § 303.252) that sets out the FDIC’s application procedures and associated processes for FDIC supervised institutions seeking to issue payment stablecoins through a subsidiary. The proposal addresses scope, definitions, filing location, content requirements, requests for additional information, processing and decision frameworks, and hearing and appeal procedures, implementing the GENIUS Act Section 5 application mandate. As of the date of this alert, Federal Register publication has not yet occurred. Comments are due 60 days after Federal Register publication.
Key aspects of the proposal
APPLICATION TRIGGER AND SCOPE
The NPR implements the GENIUS Act by requiring any FDIC supervised IDI that seeks to issue payment stablecoins through a subsidiary to apply to the FDIC for approval of that subsidiary as a PPSI. The FDIC will evaluate the applications based on the statute’s factors and guidance.
APPLICATION FACTORS
In evaluating an issuer’s application, the FDIC will consider the ability of the IDI subsidiary to, among other things, perform the following:
- Maintain adequate reserves comprised of specific categories.
- Meet monthly disclosure requirements.
- Comply with regulations that may be issued in the rapidly evolving US payment stablecoin environment.
- Redeem payment stablecoins in accordance with statutory and regulatory requirements.
TIMEFRAMES AND DECISIONS
The FDIC indicates it will process applications within specified timelines and provide an appeal mechanism for denials, as contemplated by the GENIUS Act. The NPR provides applicants notice of whether the application is considered substantially complete within 30 days of receipt and a final decision within 120 days after an application is deemed complete. The NPR also contemplates that if an applicant files ahead of the effective date of the GENIUS Act, the applicant may seek a temporary waiver of statutory requirements upon explanation of the need for the waiver. The waiver would not extend beyond 12 months from the effective date of the act.
CONTENTS OF FILING
Applications will need to describe the subsidiary’s proposed activities and governance, financial information, ownership and control procedures, customer-related policies, and provide an engagement letter with a registered public accounting firm to confirm the issuer’s reserves composition.
CUSTOMER REDEMPTIONS AND CUSTOMER TREATMENT
PPSIs must establish and publicly disclose clear, conspicuous, and timely redemption procedures that provide one-to-one convertibility of the stablecoins at a fixed monetary value, and must disclose in plain language any purchase or redemption fees. Under the GENIUS Act, PPSIs are prohibited from offering interest or yield on stablecoin holdings and from implying FDIC insurance or US government backing. Further, they must segregate and safeguard reserves and comply with the Bank Secrecy Act, anti-money laundering (BSA/AML), and sanctions obligations.
What comes next under the GENIUS Act?
The FDIC indicates that this application framework is the first of multiple GENIUS Act rulemakings. The agency expects to publish a proposed rule to establish the statutorily mandated capital, liquidity, and risk management requirements for subsidiaries of FDIC supervised institutions approved as PPSIs. This next proposal will set the prudential conditions for operations, including reserve asset diversification standards and risk management expectations tailored to PPSI business models and size.
Practical considerations for legal and compliance teams
FDIC supervised institutions evaluating payment stablecoin strategies should assess organizational readiness to meet application content expectations. In particular, institutions that seek to establish subsidiaries to issue payment stablecoins must meet the governance, control, and audit prerequisites described in public summaries, and should plan for GENIUS Act specific disclosure and reserve governance considerations once prudential standards are proposed. Institutions should also consider the following:
- Mapping proposed PPSI subsidiary activities to the act’s permitted scope and preparing board level policies reflecting reserve asset management, custody, redemption, and customer asset safeguarding.
- Inventorying third party relationships supporting issuance, redemption, custody, and reserve operations to ensure contracts address audit rights, data access, cybersecurity, business continuity, and termination assistance.
- Aligning internal audit, compliance testing, and model risk management to the application representations.
- Preparing for potential parallel state licensing or supervision touchpoints.
Given the 60 day comment window, stakeholders may want to prioritize submitting comments on the application scope, timing (including the completeness and decision timeframes), and appeals mechanics, as well as on how the application process interfaces with forthcoming prudential requirements. Nixon Peabody’s Consumer Financial Services, Bank Regulatory, and Fintech teams can assist with drafting and submitting tailored comment letters and with readiness assessments for prospective PPSI applications.
For more information on the content of this alert, please contact your Nixon Peabody attorney or the authors of this alert.